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2d Civil No. B179751
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
JANET E. BURKLE,
Petitioner,
vs.
RONALD W. BURKLE,
Respondent.________________________________________
Los Angeles County Superior Court Case No. BD390479Honorable Stephen Lachs and Honorable Roy L. Paul
________________________________________
RESPONDENT’S BRIEF
[Filed Under Seal per Court’s Order, dated January 26, 2005Cal. Rules of Court, rule 12.5]
_________________________________________
WASSER, COOPERMAN & CARTERDennis M. Wasser (SBN 41617)
Bruce E. Cooperman (SBN 76119)2029 Century Park East, Suite 1200
Los Angeles, California 90067Telephone: (310) 277-7117Facsimile: (310) 553-1793
GREINES, MARTIN, STEIN & RICHLAND LLPIrving H. Greines (SBN 39649)
5700 Wilshire Boulevard, Suite 375Los Angeles, California 90036
Telephone: (310) 859-7811Facsimile: (310) 276-5261
CHRISTENSEN, MILLER, FINK, JACOBS, GLASER, WEIL & SHAPIRO LLP
Patricia L. Glaser (SBN 55668)10250 Constellation Boulevard, 19th Floor
Los Angeles, California 90067Telephone: (310) 553-3000Facsimile: (310) 556-2920
Attorneys for RespondentRONALD W. BURKLE
TABLE OF CONTENTS
INTRODUCTION
STATEMENT OF THE CASE
Page
1
6
A. The Agreement And Its Prelude. 7
1.
2.
3.
4.
5.
Jan and Ron attempt to rebuild their brokenmamage.
Prior to entering the Agreement, Jan obtainsindependent advice from a team of experts shehandpicked and then engages in prolongednegotiations.
With the advice ofher legal team, Jan enters theAgreement knowingly and willingly, fullyunderstanding and appreciating the Agreement'sterms and its tradeoffs.
Jan's and Ron's differing economic goals: Janwanted financial stability and liquidity; Ronwanted to continue with high-risk, potentiallyhigh-return investments.
The Agreement achieves an economic tradeoffthat each party desired: Jan bargains for andreceives financial predictability and liquidity,limiting her risk, while Ron bargains for andreceives potential for high growth albeit withcorrelative risk.
7
9
11
13
15
a.
b.
The Agreement gives Jan economicsecurity and liquidity, with minimal risk.
The Agreement gives Ron the right tocontrol the couple's property withfreedom to invest as he wished, with himkeeping all gains and suffering all losses.
1
16
18
B.
c.
TABLE OF CONTENTS(Continued)
Jan's Contemporaneous Assessment Of TheAgreement: While Not Effectuating An Equal Split, ItWas Fair And Met-All Of Jan's Needs In The MannerShe Desired.
Jan Extensively Investigated And Knew The PertinentFacts Prior To Entering The Agreement.
Page
20
21
1.
2.
Jan's extensive investigation and knowledge ofthe facts.
Jan knew about the mergers at the time theyoccurred.
21
23
D.
E.
F.
Jan Was Not Unduly Influenced To Enter TheAgreement.
Over A Five-Year Period, Jan Accepts Millions OfDollars In Benefits Under The Agreement, All TheWhile Knowing The Matters She Now Claims WereConcealed And Never Uttering A Single Complaint.
The Present Proceeding.
28
33
34
LEGAL DISCUSSION 37
1. THE ORDER THAT THE AGREEMENT IS VALID ANDENFORCEABLE SHOULD BE AFFIRMED SUMMARILY:THE FINDINGS THAT JAN'S RESCISSION ACTION ISPRECLUDED BY DISPOSITIVE AFFIRMATIVEDEFENSES-RATIFICATION, ESTOPPEL, ANDLACHES-ARE NOT CHALLENGED BY JAN AND,THUS, ARE BINDING ON APPEAL. 37
A. The Trial Court Expressly Found That The AffirmativeDefenses Of Ratification, Estoppel, And LachesPrecluded Jan From Attacking The Agreement'sValidity.
11
37
B.
c.
D.
TABLE OF CONTENTS(Continued)
The Ratification, Estoppel And Laches FindingsPreclude Jan's Equitable Attack On The Validity OfThe Agreement.
Where, As Here, An Appellant Does Not ChallengeCase-Dispositive Findings, Such Findings Must BeDeemed Conclusively Established On Appeal.
Even Had Jan Challenged The Ratification, Estoppel,And Laches Findings, They Would Be Impervious ToAttack Because They Are Supported By SubstantialEvidence.
Page
39
41
42
II. THE ORDER UPHOLDING THE AGREEMENT ASVALID AND ENFORCEABLE SHOULD BE AFFIRMEDSUMMARILY: THE FINDINGS THAT JAN WILLINGLYENTERED INTO THE AGREEMENT WITH FULLKNOWLEDGE OF THE MATERIAL FACTS ANDWITHOUT UNDUE INFLUENCE ARE UNCHALLENGEDAND ARE BINDING ON APPEAL. 46
A.
B.
There Being No Challenge To Any Of The TrialCourt's Findings, This Court Must Presume That TheRecord Contains Substantial Evidence To Sustain EachFinding.
Jan Has Not Presented Any Viable Reason ForIgnoring The Substantial Evidence Rule.
47
48
1. Jan's burden-of-proof assertion does not negateapplication of the substantial evidence rule. 49
a. Jan's assertion is irrelevant because thetrial court found that, no matter how theburden ofproof was allocated,overwhelming evidence established thatthere was no undue influence.
III
49
b.
c.
TABLE OF CONTENTS(Continued)
Jan's assertion is wrong: Nopresumption of undue influence was evertriggered because, as the trial courtfound, the factual predicate for such apresumption was not proven.
Even if (contrary to both fact and law)the trial court had somehow misappliedthe burden of proof, Jan still would notbe entitled to reversal of the orderupholding the Agreement.
Page
52
56
2. Jan's objections to the statement ofdecision-directed at issues the trial court infact resolved-do not negate application of thesubstantial evidence rule. 58
c. Because Jan Chose Not To Produce (And, In Fact,Blocked) Key Evidence Within Her Control AndCentral To Her Assertions That She LackedKnowledge And Was Subjected To Undue Influence,She Failed To Prove Her Case And Should BePrecluded From Advancing Such Assertions OnAppeal. 62
1.
2.
By seeking rescission, Jan placed her and herlegal team's knowledge directly at issue.
By reason of her election to decline to introduce(and to preclude inquiry into) essential andhighly relevant evidence probative of Jan'sknowledge of the facts and what influenced herto act, Jan should not be allowed to claim onappeal that she lacked knowledge of any facts orwas subjected to undue influence.
IV
65
67
TABLE OF CONTENTS(Continued)
Page
a. By not introducing evidence of the factsgathered by Jan's legal team ininvestigating Ron's finances, Jan failedto prove a prima facie case that shelacked knowledge; she could not haveprevailed even if (contrary to fact) thetrial court had believed her. 67
b. Jan's failure to introduce evidence as toher legal team's knowledge of Ron'sfinances permitted the trier of fact todraw an inference adverse to Jan's claimthat she lacked knowledge. 68
c. Where a plaintiff places certain issues incontroversy by bringing suit, but assertsprivilege to preclude the other party fromhaving access to probative evidence, theplaintiffs suit should properly bedismissed. 70
D. Although Jan Raises No Tenable Substantial EvidenceArgument, Substantial Evidence Supports TheFindings That Jan Freely Entered The Agreement WithFull Knowledge of the Facts, With Full Appreciationof Its Compromises, Benefits And Risks, And WithoutUndue Influence. 73
1.
2.
Substantial evidence supports the trial court'sdetermination that the Agreement is valid andenforceable.
Jan's evidentiary quibbles are baseless.
74
76
E. There Is No Merit In Jan's Contention That FindingsOf Undue Influence And Fiduciary Breach WereCompelled As A Matter Of Law.
v
84
TABLE OF CONTENTS(Continued)
Page
III. NO OTHER BASIS EXISTS FOR REVERSING THEORDER UPHOLDING THE AGREEMENT'S VALIDITYAND ENFORCEABILITY. 89
A. Contrary To Jan's Assertions, Spousal Agreements,Particularly Those Facilitating Reconciliation, AreFavored Even IfThe Property Is Not Divided PerfectlyEqually. 89
B. Contrary To Jan's Assertions, The Agreement Is NotSubject To Invalidation For Lack Of LawfulConsideration. 91
1. The Agreement needn't be supported by anyconsideration. 91
2. There is no restriction on the type ofconsideration that can support a postmaritalagreement. 92
3. There is no merit to any of Jan's other claimsthat the consideration was inadequate. 95
C. The Dispute Over Whether Ron Tendered AdequatePayment After Jan Repudiated The Agreement Is NotA Ground For Rescission. 98
D.
E.
Contrary To Jan's Assertions, Ron Is Not Suing ForSpecific Performance; He Simply Asks, In ResponseTo Jan's Claims, That The Agreement Be Honored.
Jan's Discovery And Evidentiary Contentions AreMeritless.
101
102
1.
2.
Jan's arguments are waived.
The discovery rulings were within the trialcourt's broad discretion.
VI
102
103
TABLE OF CONTENTS(Continued)
Page
3. The discovery rulings could not have beenprejudicial given the trial court's finding thatJan did not rely on Ron in entering theAgreement. 105
4. Jan has demonstrated neither error nor prejudicein any evidentiary ruling. 105
F. Contrary to Jan's Contention, The Statutes MandatingFormal Asset Disclosures In A Marital DissolutionProceeding Do Not And Cannot Undermine TheValidity Of The Agreement. 106
1. Exactly as the statutes expressly permit, the trialcourt found good cause for excusingcompliance with the formal disclosurerequirements; Jan's brief neither mentions norattacks this finding and, thus, the finding isbinding on appeal. 108
2. Even if the statutory disclosure requirementswere not excused by the finding of good cause,the statutory scheme was not applicable, as itwas intended to apply only to agreements,unlike the one here, made in dissolutionproceedings with the purpose of terminating themarriage and dividing property in thoseproceedings. 110
3. The statutory disclosure requirements have noapplication here because the Agreement wasintended to continue, not dissolve, Ron andJan's marriage and was independent of anypending dissolution action. 115
4. Nothing in the statutory disclosure requirementsdirects voiding an otherwise valid agreement. 117
Vll
TABLE OF CONTENTS(Continued)
Page
5. Even if the statutory scheme applied and even ifthere were no good cause finding, there stillwould be no basis for reversing the order. 121
CONCLUSION
CERTIFICATION
a.
b.
Jan's action is time barred.
Jan has not shown prejudice.
Vlll
121
121
123
125
TABLE OF AUTHORITIES
Cases:
1119 Delaware v. Continental Land Title Co.(1993) 16 Cal.AppAth 992
2,022 Ranch, LLC v. Superior Court(2003) 113 Cal.AppAth 1377
AJ. Industries, Inc. v. Ver Halen(1977) 75 Cal.App.3d 751
Adams v. Adams(1947) 29 Ca1.2d 621
Advanced Micro Devices, Inc. v. Intel Corp.(1994) 9 Ca1.4th362
Andrew v. Andrew(1942) 51 Cal.App.2d 451
Assilzadeh v. California Federal Bank(2000) 82 Cal.AppAth 399
Atkinson v. District Bond Co.(1935) 5 Cal.App.2d 738
Barneyv. Fye(1957) 156 Cal.App.2d 103
Bauer v. Bauer(1996) 46 Cal.AppAth 1106
Beverage v. Canton Placer Mining Co.(1955) 43 Ca1.2d 769
BGJ Associates, LLC v. Wilson(2003) 113 Cal.AppAth 1217
Bickel v. City of Piedmont(1997) 16 Ca1.4th 1040
IX
Page
42
48
98, 106
52
39
90
85
99, 100
49, 50
59
99
42
47
TABLE OF AUTHORITIES(Continued)
Cases:
Boeseke v. Boeseke(1974) 10 Cal.3d 844
Booth v. Bond. (1942) 56 Cal.App.2d 153
Boro v. Ruzich(1943) 58 Cal.App.2d 535
Bradner v. Vasquez(1954) 43 Cal.2d 147
Building Industry Assn. of San Diego County v. State WaterResources Control Bd.(2004) 124 Cal.AppAth 866
Buzgheia v. Leasco Sierra Grove(1997) 60 Cal.AppAth 374
Cameron v. Cameron(1948) 88 Cal.App.2d 585
Chapman College v. Wagener(1955) 45 Cal.2d 796
Chrisman v. Southern Cal. Edison Co.(1927) 83 Cal.App. 249
Collins v. Collins(1957) 48 Cal.2d 325
Colton v. Stanford(1890) 82 Cal. 351
Conservatorship of Davidson(2003) 113 Cal.AppAth 1035
x
Page
83
102
101
54,55
42
57
66, 83
63
93
56,83
56, 76
50,51
TABLE OF AUTHORITIES(Continued)
Cases:
Corenevsky v. Superior Court(1984) 36 Cal.3d 307
Currnninsv.Currnnins(1935) 7 Cal.App.2d 294
Dale v. Dale(1927) 87 Cal.App. 359
Dalitz v. Penthouse International, Ltd.(1985) 168 Cal.App.3d 468
Dieckmeyer v. Redevelopment Agency of Huntington Beach(2005) 127 Cal.AppAth 248
Duffy v. Cavalier(1989) 215 Cal.App.3d 1517
Elden v. Superior Court(1997) 53 Cal.AppAth 1497
Estate of Cover(1922) 188 Cal. 133
Estate of Sarabia(1990) 221 Cal.App.3d 599
Estate of Stephens(2002) 28 Cal.4th 665
Estate of Warner(1914) 168 Cal. 771
Evangelatos v. Superior Court(1988) 44 Cal.3d 1188
Fishbaugh v. Fishbaugh(1940) 15 Cal.2d 445
Xl
Page
42
93
93
70
42
84,85
108
55
51, 53
51
40
107
94, 119
TABLE OF AUTHORITIES(Continued)
Cases:
Foreman & Clark Corp. v. Fallon(1971) 3 Ca1.3d 875
Fremont Indemnity Co. v. Superior Court(1982) 137 Cal.App.3d 554
Gedstad v. Ellichman(1954) 124 Cal.App.2d 831
Giacomazzi v. Rowe(1952) 109 Cal.App.2d 498
Gill v. Rich(2005) 128 Cal.AppAth 1254
Godfrey v. Godfrey(1939) 30 Cal.App.2d 370
Gold v. Greenwald(1966) 247 Cal.App.2d 296
Golden Eagle Ins. Co. v. Foremost Ins. Co.(1993) 20 Cal.AppAth 1372
Guerrieri v. Severini(1958) 51 Ca1.2d 12
Guess?, Inc. v. Superior Court(2000) 79 Cal.AppAth 553
Hagge v. Drew(1945) 27 Ca1.2d 368
Hamud v. Hawthorne(1959) 52 Ca1.2d 78
Hartbrodt v. Burke(1996) 42 Cal.AppAth 168
XlI
Page
47
70
39,43,100
40
39
40
51
58
100
45
39,42
41
70
TABLE OF AUTHORITIES(Continued)
Cases:
Hasson v. Ford Motor Co.(1982) 32 Ca1.3d 388
Hayward v. Widmann(1933) 133 Cal.App. 184
Herman v. Los Angeles County MetropolitanTransportation Authority(1999) 71 Cal.AppAth 819
Hill v. Hill(1943) 23 Ca1.2d 82
HLC Properties, Ltd. v. Superior Court(2005) 35 Ca1.4th 54
Holland v. Pyramid Life Ins. Co. of Little Rock(5th Cir.1952) 199 F.2d 926
Humphrey v. Appellate Division(2002) 29 Ca1.4th 569
In re Jonathan B.(1992) 5 Cal.AppAth 873
Jones v. Wagner(2001) 90 Cal.AppAth 466
Keithley v. Civil Service Bd.(1970) 11 Cal.App.3d 443
Kids' Universe v. In2Labs(2002) 95 Cal.AppAth 870
Kossler v. Palm Springs Developments, Ltd.(1980) 101 Ca1.App.3d 88
X111
Page
48
83
62
90
72
45
113
58
85
76
83
99
TABLE OF AUTHORITIES(Continued)
Cases:
Lane v. Lane(1926) 78 Cal.App. 326
Laraway v. Sutro & Co.(2002) 96 Cal.AppAth 266
Lazzarevich v. Lazzarevich(1952) 39 Ca1.2d48
Leathers v. Leathers(1946) 77 Cal.App.2d 134
Lemat Corp. v. American Basketball Assn.(1975) 51 Cal.App.3d 267
Livermore v. Beal(1937) 18 Cal.App.2d 535
Locke v. Warner Bros., Inc.(1997) 57 Cal.AppAth 354
Louisville Title Ins. Co. v. Surety Title & Guar. Co.(1976) 60 Cal.App.3d 781
Marriage of Barneson(1999) 69 Cal.AppAth 584
Marriage of Bonds(2000) 24 Ca1.4th 1
Marriage of Brewer & Federici(2001) 93 Cal.AppAth 1334
Marriage of Broderick(1989) 209 Cal.App.3d 489
Marriage of Cesnalis(2003) 106 Cal.AppAth 1267
XIV
Page
94,119
108
63
50
40
41
42
97
54
84,85
87,90
91
43
TABLE OF AUTHORITIES(Continued)
Cases:
Marriage of Connolly(1979) 23 Ca1.3d 590
Marriage of Cream(1993) 13 Ca1.AppAth 81
Marriage of Dawley(1976) 17 Ca1.3d342
Marriage of Delaney(2003) 111 Ca1.AppAth 991
Marriage of Duncan(2001) 90 Ca1.AppAth 617
Marriage of Eben-King & King(2000) 80 Ca1.AppAth 92
Marriage of Fell(1997) 55 Ca1.AppAth 1058
Marriage of Fink(1979) 25 Ca1.3d 877
Marriage of Friedman(2002) 100 Ca1.AppAth 65
Marriage of Garrity & Bishton(1986) 181 Ca1.App.3d 675
Marriage of Hahn(1990) 224 Ca1.App.3d 1236
Marriage of Haines(1995) 33 Ca1.AppAth 277
Marriage of Heggie(2002) 99 Ca1.AppAth 28
xv
Page
81, 88
89
84
53
109
109
119,120
47
50, 75, 85, 87-90
59
81
54
81,88
TABLE OF AUTHORITIES(Continued)
Cases:
Marriage of Hixson(2003) 111 Cal.App.4th 1116
Marriage of Lange(2002) 102 Ca1.App.4th 360
Marriage of McLaughlin(2000) 82 Ca1.App.4th 327
Marriage of Mix(1975) 14 Cal.3d 604
Marriage of Peters(1997) 52 Cal.App.4th 1487
Marriage of Rosevear(1998) 65 Ca1.App.4th 673
Marriage of Saslow(1985) 40 Cal.3d 848
Marriage of Smith(1990) 225 Ca1.App.3d 469
Marriage of Steiner(2004) 117 Cal.App.4th 519
Marriage of Tammen(1976) 63 Ca1.App.3d 927
Marriage of Varner(1997) 55 Cal.App.4th 128
Marriage of Wipson(1980) 113 Ca1.App.3d 136
Marsiglia v. Marsiglia(1947) 78 Ca1.App.2d 701
XVI
Page
104
54
57
48
51
75
53
109
57, 121
90
87
75
51
TABLE OF AUTHORITIES(Continued)
Cases:
Matassa v. Matassa(1948) 87 Cal.App.2d 206
Mejia v. Reed(2003) 31 Cal.4th 657
Murphyv. Atchison, T. & S.F. Railway(1958) 162 Cal.App.2d 818
Muzquiz v. Emeryville(2000) 79 Cal.AppAth 1106
Nealis v. Carlson(1950) 98 Cal.App.2d 65
Obregon v. Superior Court(1998) 67 Cal.AppAth 424
O'Hara v. Wattson(1916) 172 Cal. 525
Paratore v. Perry(1966) 239 Cal.App.2d 384
Paterno v. State of California(1999) 74 Cal.AppAth 68
People v. Hull(1991) 1 Cal.4th 266
Persson v. Smart Inventions, Inc.(2005) 125 Cal.AppAth 1141
Petersen v. Securities Settlement Corp.(1991) 226 Cal.App.3d 1445
Plante v. Gray(1945) 68 Cal.App.2d 582
XVll
Page
90,91
89
57
58
40
102
94
102
57
113
87
85
111
TABLE OF AUTHORITIES(Continued)
Cases:
Powell v. Goldsmith(1984) 152 Cal.App.3d 746
Rader v. Thrasher(1962) 57 Cal.2d 244
Ramirez v. Sturdevant(1994) 21 Cal.AppAth 904
Reed v. Mutual Service Corp.(2003) 106 Cal.AppAth 1359
Rice v. Brown(1953) 120 Cal.App.2d 578
Rosenthal v. Great Western Fin. Securities Corp.(1996) 14 Cal.4th 394
Roth v. State Bar(1953) 40 Cal.2d 307
Sacks v. FSR Brokerage, Inc.(1992) 7 Cal.AppAth 950
Saret-Cook v. Gilbert, Kelly, Crowley & Jennett(1999) 74 Cal.AppAth 1211
Sargent Fletcher, Inc. v. Able Corp.(2003) 110 Cal.AppAth 1658
Schwabv. Schwab(1959) 168 Cal.App.2d 20
Scott v. Pacific Gas & Electric Co.(1995) 11 Cal.4th 454
Scottsdale Ins. Co. v. Essex Ins. Co.(2002) 98 Cal.AppAth 86
XV111
Page
63
93
76
43
92
85
52
78, 105
39, 100
91,93
48
58
TABLE OF AUTHORITIES(Continued)
Cases:
Shadow Traffic Network v. Superior Court(1994) 24 Cal.AppAth 1067
Shapiro v. Equitable Life Assur. Soc.(1946) 76 Cal.App.2d 75
Singh v. Burkhart(1963) 218 Cal.App.2d 285
Snyder v. Snyder(1951) 102 Cal.App.2d 489
Soule v. General Motors Corp.(1994) 8 Cal.4th 548
Steiny & Co. v. California Electric Supply Co.(2000) 79 Cal.AppAth 285
Stockinger v. Feather River Community College(2003) 111 Cal.AppAth 1014
Tillaux v. Tillaux(1897) 115 Cal. 663
Vai v. Bank of America(1961) 56 Cal.2d 329
Weil v. Weil(1951) 37 Cal.2d 770
Weingarten v. Weingarten(1989) 234 N.J.Super. 318
Westinghouse Credit Corp. v. Wolfer(1970) 10 Cal.App.3d 63
White v. Moriarty(1993) 15 Cal.AppAth 1290
XIX
Page
50
69
100
53
57
70
102
93
86,87
50, 76
66
69
43
TABLE OF AUTHORITIES(Continued)
Statutes:
28 U.S.c. § 1961
California Constitution, Article VI, § 13
California Rules of Court, rule 5.175
California Rules of Court, rule 5.180
Civil Code, § 178
Civil Code, § 1440
Civil Code, § 1511
Civil Code, § 1515
Civil Code, § 1575
Civil Code, § 1588
Civil Code, § 1589
Civil Code, § 1605
Civil Code, § 1614
Civil Code, § 2332
Civil Code, § 3387
Civil Code, § 3532
Civil Code, § 3545
Code of Civil Procedure, § 632
Code of Civil Procedure, § 634
xx
Page
96
56, 121
104
36
111
99
99
99
53
39
39
92,96
52
62
101
100
52
59
59-61
TABLE OF AUTHORITIES(Continued)
Page
Statutes:
Corporations Code, § 16403 54
Corporations Code, § 16404 54
Corporations Code, § 16503 54
Evidence Code, § 115 51
Evidence Code, § 412 68,69,72
Evidence Code, § 413 68,69,72
Evidence Code, § 622 12
Evidence Code, § 623 40
Evidence Code, § 913 71-73
Family Code, § 721 52-55, 81, 113
Family Code, § 850 91, 113
Family Code, § 852 113,119
Family Code, § 1100 81,113
Family Code, § 1101 41
Family Code, § 1500 52, 113
Family Code, § 1600 114
Family Code, § 1615 119
Family Code, § 1617 41, 114
XXI
TABLE OF AUTHORITIES(Continued)
Page
Statutes:
Family Code, § 2000
Family Code, § 2100
Family Code, § 2102
Family Code, § 2104
Family Code, § 2105
Family Code, § 2106
Family Code, § 2107
Family Code, § 2113
Family Code, § 2122
Family Code, § 2550
Probate Code, § 16004
XXll
112, 113
106, 110-113, 118-120, 122
112
112
108, 112, 114, 118
108, 118
118
118
121
90
54
TABLE OF AUTHORITIES(Continued)
Other Authorities:
Hogoboom & King, Cal. Practice Guide: Family Law(Rutter Group 2005)
http://www.federalreserve.gov/releases/ h15/19971124
http://wwws.publicdebttreas.gov/AI/OFAuctions
Law Rev. Commission Comments to Evidence Code, § 412
Rest.2d Contracts, § 74(1)
Rest.2d Contracts, § 257
Stats. 2001, ch. 703
3 Witkin, Cal. Evidence (4th ed. 2000) Presentation At Trial
3 Witkin, Cal. Procedure (4th ed. 1996) Actions
7 Witkin, Cal. Procedure (4th ed. 1997) Trial
XXlll
Page
66, 111
96
96
72
97
100
107, 118
69, 72
39
59
INTRODUCTION
Eight years ago, appellant Janet Burkle ("Jan") and her husband
Ronald Burkle ("Ron")-a wealthy and successful couple-decided to give
their broken marriage another try. In aid of their reconciliation attempt,
they decided to enter into a postmarital agreement designed to iron out
sources of marital friction relating to their differing financial objectives.
Jan wanted the financial status quo. She wanted to preserve the
extremely affluent lifestyle that Ron's previously successful, but risky,
investments had produced. She did not want future investments to
jeopardize the wealth already accumulated. Ron, on the other hand, wanted
to continue investing aggressively in high-risk ventures. The agreement,
negotiated over a period of months, harmonized Jan's and Ron's respective
objectives to the then-satisfaction of each.
At all times, Jan was advised by her chosen team of top-notch
attorneys (family law experts), accountants, investigators, and other
advisors. When Jan signed the agreement, it gave her exactly what she
wanted: financial stability, with minimal risk, at a level of affluence
unattainable by most. Among other things, the agreement entitled Jan to the
following: The right to receive, upon her request or upon later divorce,
more than $30 million tax free, with interest at 5% annually until paid; plus
payments of $1 million per year, which became her separate property on
receipt, to be spent as Jan wished, so long as the couple remained together;
plus payment of all her living expenses; plus a home of her choosing, to be
purchased for her by Ron, if the couple later separated.
1
In return, Ron was entitled to freely invest the assets, it being agreed
that he would personally keep any gains and suffer any losses. Jan
expressly acknowledged that the assets allocated to Ron "may and probably
will increase dramatically in value in the future ...."
After the agreement was executed, Ron fully performed for more
than four years, without a word of objection from Jan, and Jan got exactly
what she bargained for. The parties remained married, and Jan received
from Ron millions of dollars in payments under the agreement, without
strings, to spend exactly as she wished. However, exactly as Jan expected
might happen, Ron's investments were spectacularly successful. He took
significant risks and dramatically enhanced his wealth.
Three years ago, Jan decided the marriage was not fulfilling her
expectations and she left Ron. About a year later, she decided she wanted a
share of Ron's increased wealth. She wanted the full benefit of the risks
taken by Ron even though she entered the agreement because she wanted to
avoid those very risks. In short, Jan wanted it all-she wanted the lifetime
security the agreement gave her plus the gains she relinquished in order to
obtain such security.
But the agreement precluded Jan from having it all. How to get
around the agreement she freely and knowingly entered? The answer: Seek
to rescind the agreement and concoct a tale. Despite her legal team's
extensive pre-agreement investigation into Ron's financial affairs, despite
comprehensive financial disclosures made by Ron before the agreement,
despite her own intimate knowledge of Ron's investments and business
activities, and despite the widespread publicity that surrounded them, Jan
2
claimed she was entitled to rescission because she was ignorant of Ron's
finances and was unduly influenced when she entered the agreement.
But Jan's effort to overturn the agreement didn't work, for a simple
reason: She didn't prove her case; her story wasn't credible. The trial
judge (Hon. Stephen Lachs) didn't buy her story. After listening to ten days
of evidence, Judge Lachs issued a 17-page statement of decision rejecting
each of Jan's assertions. He determined: (1) the agreement was valid and
enforceable-that Jan had entered the agreement freely, with full
knowledge of the pertinent facts, with full appreciation of what she was
receiving and relinquishing, and without undue influence; and (2) Jan was
precluded from seeking rescission by the dispositive affirmative defenses of
ratification, estoppel and laches because, knowing the pertinent facts, she
willingly accepted from Ron, over a four-year period of time, millions of
dollars in contract benefits, plus a new home, without ever voicing a word
of complaint.
Amazingly, despite a 33,049-word opening brief, Jan neither
mentions nor challenges any of the trial court's findings. Nor does she
acknowledge or come to grips with the overwhelming evidence that
supports them. Indeed, Jan doesn't even confront the fact that her proof on
the issue of lack of knowledge was itself legally insufficient to support a
finding in her favor.
Rather than confronting these realities, Jan dodges them. She
recites only the limited evidence that was favorable to her-the very
evidence that Judge Lachs rejected as being incredible-hoping that this
Court will second-guess Judge Lachs' findings. But, of course, Jan cannot
3
retry her case on appeal. Rather, Judge Lachs' unchallenged findings are
binding on appeal. They conclusively establish not just that the agreement
is valid and enforceable, but also that Jan was precluded from seeking
reSCISSIOn.
Marital agreements, like the one reached here, are supported by
strong public policy considerations because they facilitate marital harmony,
help in effectuating reconciliation of troubled marriages, and reduce the
likelihood of litigation. Courts should strive to uphold such agreements
especially where, as here, they are supported by unchallenged findings that
the parties entered the agreement with full knowledge of the facts, with full
appreciation of the agreement's tradeoffs, with full representation by
talented legal teams, and without undue influence.
Avoiding what matters-the terms of the agreement, the findings
rejecting the credibility of Jan's testimony, the evidence that supports such
findings, and her own failure of proof-Jan dwells on irrelevant
considerations. She repeatedly complains that Ron did better than she did
after the agreement was reached. But Jan obtained exactly what she
bargained to receive: security, wealth and risk avoidance; and Ron gained
what Jan, at the time she signed the agreement, acknowledged he might
achieve: a "probability" that his assets would dramatically increase in
value. It is elementary, of course, that the validity of an agreement is
measured at the time it is reached; it cannot be invalidated because one
party later does better than the other.
The order upholding the agreement's validity and enforceability and
determining that Jan was legally precluded from seeking rescission based
4
on the dispositive defenses of ratification, estoppel and laches is supported
by unchallenged findings, by substantial evidence, by the law and by strong
public policy. It should be affirmed summarily.
5
STATEMENT OF THE CASE
After hearing ten days of evidence, the trial court determined that the
postmarital agreement ("Agreement") between Jan and Ron Burkle is valid
and enforceable, holding as follows:
• Jan "signed the Agreement freely and voluntarily, and free from
any emotional influence that interfered with an exercise of her
own free will." (Exh. A:775 [,-r 6(a)]Y
• Jan was fully informed regarding her and Ron's assets. (Exh.
A:780-781, 783 [,-r,-r 32, 46-47].)
• Ron "did not conceal assets or significant financial information
from" Jan. (Exh. A:775 [,-r 6(b)].)
• The Agreement was "fair and equitable" when made. (Exh.
A:787 [,-r 60].)
• Jan's acceptance of benefits under the Agreement for over four
years, while knowing the pertinent facts and not voicing any
complaint, precluded her from rescinding the Agreement by
reason of her ratification, estoppel and laches. (Exh. A:783-784,
787 [,-r,-r 48, 59].)
Under the most elementary of appellate principles, we recite the
evidence in the light most favorable to the trial court's decision and
findings. (See discussion in § ILA, below.)
1 Exhibit A is the trial court's Statement of Decision attached to theend of this brief. The exhibit is copied from Volume IV of the Appellant'sAppendix and refer to it by its Bates-stamped page numbers, so that "Exh.A:775 [,-r 6(a)]" refers to paragraph 6(a) of Bates-stamped page 775 ofExhibitA.
6
A. The Agreement And Its Prelude.
1. Jan and Ron attempt to rebuild their broken
marriage.
Jan and Ron had been living separately for a number of years, he in
Beverly Hills, she with their children in Claremont. (3/24 RT 66:8-70: 14,
133:1-13; AA V:798 [~B].)2
In June 1997, Jan filed a dissolution petition. (AA I: 1.) This acted
as a catharsis for the couple. Thereafter, relations warmed as Jan and Ron
discussed what had gone wrong with their marriage and how they could try
to fix it. (3/24 RT 81:11-84: 10; 6/17 RT 177:5-179:8.) They decided to
attempt reconciliation and the dissolution proceeding was never prosecuted
and was eventually dismissed.'
Ron had been extremely successful in high-risk investments in
various supermarket chains-including Food4Less-and had built up
substantial assets." (3/24 RT 61:3-62:5,135:6-13; 6/29 RT 54:16-55:14,
2 Citations to the Appellant's Appendix are in the format"AA Volume:page." The Reporter's Transcript ("RT") is referred to by thedate of the transcript, then page number:line number, e.g., 6/18 RT 181:15182:9.
3 Jan did not pursue previously initiated discovery or restrainingorders; the dissolution proceeding was held in abeyance while the partiesworked at restoring the marriage; and it was eventually dismissed in June2003. (6/29 RT 85:20-86:24; 6/30 RT 39:7-11; AA 1:4; AA V:969, 972[Ron's lawyer writes Jan's lawyer that "things are assuming a 'stand-down'posture" while Ron and Jan attempt to restore the marriage], 980 [Ron'slawyer requests confirmation of "open extension" to file a response todissolution petition], 982 [Jan's lawyer: "All requests for restraining ordersare currently on hold, and will remain so as long as the parties are workingat restoring the marriage"].)
4 Food4Less was Ralphs's parent company, and the parties usedRalphs and Food4Less interchangeably. (E.g., 3/24 RT 61:9-62:5, 128:22
(continued...)
7
63:21-65:9.) Ron and Jan, however, had differing views as to risk and risk
tolerance; they had different visions of their financial futures; they had
different ideas about financial matters-causing anxiety and bad feelings in
the marriage. (E.g., 3/28 RT 151:12-152:10; 6/16 RT 180:25-181:20; 6/17
RT 28:23-29:8; 6/18 RT 189:19-190:5; 6/29 RT 71:20-72:15,119:7
120:24.)
As part of the reconciliation process, Ron suggested an agreement to
harmonize the couple's economic goals and stabilize their relationship.
(3/24 RT 111:8-23.) Ron's suggestion became the basis for months of
negotiations that ultimately led to the Agreement.
The central theme of the Agreement was to continue (not end) the
marriage, while allowing both Jan and Ron to achieve their differing
economic goals. The Agreement recited its purposes as follows:
• To "promote increased understanding, harmony and trust by
effectively and finally resolving all financial issues, disputes and
conflicts they might have now and in the future." (AA V:798.)
• To "increase the probability that [Jan and Ron would] remain
married to each other and [to] remove [that] substantial
impediment to their marriage ... one which ha[d] already
brought them close to the point of dissolving the marriage."
(AA V:806 [,-r 2.14].)5
4 ( ...continued)25,183:2-5; 7/2 RT 60:13-15, 64:14-19.)
5 While the Agreement was in furtherance of reconciliation, theAgreement recited it "fully and fairly satisflied] [Ron'S and Jan's] propertyand financial rights and expectations" regardless whether their
(continued...)
8
Although she equivocated at trial, Jan ultimately testified that the
first provision accurately recited her intent in 1997 (6/18 RT 170:19-172:4);
she never expressed any contemporaneous disagreement with the second
statement (7/6 RT 21:2-19).
2. Prior to entering the Agreement, Jan obtains
independent advice from a team of experts she
handpicked and then engages in prolonged
negotiations.
Before the Agreement was entered, there were months of
negotiations conducted between Jan's and Ron's separate counsel.
(AA V:969 [inter-counsel July 2 letter noting couple's attempt to reconcile],
973-983, 990-1040; AA VI:1041-1135 [counsels' negotiation
correspondence]; 6/30 RT 42:8-46:18.) Ron and Jan did not negotiate the
terms between themselves; rather, Ron honored Jan's request that the matter
be handled through their respective attorneys. (3/24 RT 138:4-22, 153:8-
154:1; 7/2 RT 74:7-77:17,168:19-170:7; AA V:989-1040; AA VI:I041
1135.)
Assisted by her personal lawyer, Franklin Pelletier, Jan interviewed
numerous family-law attorneys before selecting Barry Harlan, who, with
Pelletier, put together a team of highly qualified lawyers, including two
additional certified family-law specialists, plus experts in tax, corporate,
securities, and real estate law. (6/17 RT 169:3-8; 6/29 RT 24:10-29:9, 79:8-
5 ( •.• continued)reconciliation efforts succeeded; reconciliation was not a condition of theAgreement. (AA V:798, 799 [,-[ D].)
9
80:21, 178:19-184:4; 6/30 RT 19:11-26:5,38:1-21,47:1-20; AA V:840-
851,922-924.) Jan also had the services of a preeminent forensic
accounting firm (3/23 RT 74:15-77:7; 6/29 RT 84:16-25) and a private
investigator (6/29 RT 19:9-13).6
This team had over six months to investigate Ron's assets and advise
Jan before the Agreement was signed. (AA V:800 [~ 2], 839-852, 920-928,
984-986 [attorney billing records and privilege logs].) The team billed at
least $166,000 in legal and expert consultant fees for its work. (AA V:853-
854,859; AA VI:1134 [~~ 2, 4], 1136; see also AA V:839-852 [Harlan's
billing records], 920-928 [billing records for Jan's personal lawyer,
Pelletier], 976, 983; 6/29 RT 193:4-194:1.)
6 Jan secretly gathered her legal team over a two-month periodbefore filing her dissolution petition in June 1997. (3/24 RT 148:10-14;6/29 RT 14:8-21,26:15-29:9,147:21-148:3; AA V:840-841 [April-June1997 attorney billing records], 920-924 [same].) Yet she continued tointerview leading family-law lawyers in order to conflict them out ofrepresenting Ron. (Compare AA V:840, 960 [Harlan bills nearly 21 hoursbefore 5/22 retainer letter confirming Jan's request for his representation]with AA V:922-924 [Pelletier entries noting visits after 5/22 to preeminentfamily-law attorneys]; 6/29 RT 26:12-27:25 [same].) "The reasonableinferences here" are that Jan "contacted" all the high-powered familylawyers in L.A. "to disqualify [Ron] from representation." (Respondent'sAppendix ("RA") 49 [Judge Paul, denying Jan's motion to disqualify Ron'spresent trial counsel]; see also 3/24 RT 80:1-12.)
10
3. With the advice of her legal team, Jan enters the
Agreement knowingly and willingly, fully
understanding and appreciating the Agreement's
terms and its tradeoffs,
Jan personally reviewed both the original and the final drafts of the
Agreement. (6/18 RT 71:18-72:4,166:24-167:25,169:13-17,170:8-18,
180:4-14.) As a licensed real estate agent, Jan was experienced with
contracts. (6/17 RT 156:15-157:10; 6/18 RT 170:8-18, 180:4-14.)
Prior to Jan's executing the Agreement, Jan's principal lawyer, Barry
Harlan, a certified family-law specialist and name partner in his firm (6/29
RT 179:3-180:10), certified in a writing attached to the Agreement that he
advised and consulted with Jan in connection with her marital rights and
obligations; that he fully informed her of the legal effect of the Agreement
on her rights; and that Jan acknowledged to him that "she understood the
legal effect of the foregoing Agreement." (AA V:824.) In his deposition
testimony, read into the record, Harlan stated it was his practice to sign such
confirmations only if they were true. (6/29 RT 185:15-19.)
Jan consulted with Mr. Harlan and two other certified family-law
specialists retained as consultants before she signed the Agreement; Jan
admitted that each advised her of her rights under the Agreement; and that
each answered all questions that she had about the Agreement. (AA V:932,
934; 6/18 RT 158:18-159:20; see also 6/18 RT 168:18-169:1, 180:16
181:14; 6/30 RT 20:22-21:6; 7/6 RT 9:8-10:6.)
11
That Jan knew what she was doing was confirmed by the Agreement
itself. In underlined capital letters, Recital F of the Agreement affirmed:
• That Jan had "CAREFULLY READ THE ENTIRE
AGREEMENT";
• That the Agreement had "BEEN FULLY EXPLAINED TO
[HER] BY [HER] RESPECTIVE COUNSEL";
• That Jan understood "THE CONTENTS AND LEGAL EFFECT
OF [THE] AGREEMENT"; and
• That Jan had "DISCUSSED WITH [HER] RESPECTIVE
COUNSEL, AT LENGTH, NUMEROUS ALTERNATIVES
AVAILABLE WITH RESPECT TO THE FORM AND
SUBSTANCE OF A POSTMARITAL AGREEMENT AND
THAT THEY ... ADOPTED THE PROVISION OF [THE]
AGREEMENT AFTER CAREFUL CONSIDERATION OF
SUCH AVAILABLE ALTERNATIVES." (AA V:799 [~F].?
Recital F further affirmed-again, in underlined capital letters-that
Jan was aware that:
"... THE ASSETS [ASSIGNED TO RON] MAY AND
PROBABLY WILL INCREASE DRAMATICALLY IN
VALUE IN THE FUTURE AND THAT JAN'S INTEREST
THEREIN IS BEING FIXED AT THIS TIME,
7 Under Evidence Code section 622, recitals (except as toconsideration) appearing in a written agreement are conclusively deemed tobe true, as the Agreement in the instant case expressly confirmed.(AA V:799-800 [~ G.l].)
12
NOTWITHSTANDING THE POSSIBILITY OF FUTURE
INCREASES." (AA V:799 [~F].)
Jan testified that she read this recital; that it was true; and that she
was satisfied with the recital at the time she executed the Agreement. (6/18
RT 180:12-185:10.) She admitted, based on her experience as a licensed
real estate agent, that she knew that such a capitalized and underlined
provision has special significance. (6/18 RT 179:25-180:14.)
In a separate recital, Jan acknowledged that she had "relied solely on
her[] personal judgment" and not "on any statement, warranty or
representation of the other party [i.e., Ron], or any representative of the
other Party" and that she had entered the Agreement "freely, willingly, and
voluntarily." (AA V:800-801 [~~ G.8, G.10].)
The trial court found that the Agreement's recitals accurately
reflected Jan's and her attorneys' states of mind at the time the Agreement
was executed. (AA IV:783 [~ 44].)
4. Jan's and Ron's differing economic goals: Jan
wanted financial stability and liquidity; Ron
wanted to continue with high-risk, potentially high
return investments.
Ron and Jan intended the Agreement's "financial provisions ... [to]
fully and fairly satisfy their property and financial rights and expectations"
and to resolve fully all possible financial issues between them.
(AA V:798.) They understood and appreciated that each had differing
13
financial goals and risk tolerances. (E.g., 3/28 RT 205:1-206:10; 6/16 RT
180:25-181:20; 6/17 RT 185:5-21; 6/29 RT 41:3-24; see also § A.l, above.)
The Agreement sought to reconcile the couple's differing financial
objectives as part of their reconciliation effort.
Jan wanted to preserve the financial success the couple had already
attained. She favored financial stability, and she desired her own financial
independence. (3/23 RT 112:3-17; 3/24 RT 19:5-12; 3/28 RT 159:4-14,
205:1-206:10; 6/18 RT 109:2-14, 175:1-23, 189:1-14; 6/29 RT 35:10-36:17,
71:20-72:15.) She was risk averse. (3/28 RT 151:12-152:10; 6/18 RT
189:19-190:5; 6/29 RT 119:7-120:24.) She acknowledged she married Ron
for "security" and "knew he would always be a good provider and (she)
would never have to do without." (AA V:1196.) As the Agreement stated,
Jan "desire[d] financial security and assurance that she [would] be able to
enjoy her present lifestyle without hindrance or risk ofloss." (AA V:798.)
At trial, Jan tried to back away from this language in the Agreement.
She repeatedly tried to deny at trial that financial security and risk aversion
had been among her goals. (6/18 RT 173:16-174:14, 189:15-18; 6/29 RT
34:19-35:11,36:18-37:2.) Ultimately, however, Jan admitted, both at trial
and in her impeaching deposition testimony, that these were her goals, that
she disliked risk, and that she had been concerned about Ron making risky
investments. (6/18 RT 174:20-176:20, 189:1-190:5; 6/29 RT 35:12-36:17,
119:7-120:4.) Jan also desired to have her own money to spend as she
wished, without having to obtain Ron's approval. (6/16 RT 180:25-181:20;
6/17 RT 28:23-29:8; 6/29 RT 71:17-72:15.)
14
For his part, Ron desired the "financial freedom to make investments
which could yield high returns but which carry the risk of significant loss."
(AA V:798.) He wanted to continue to pursue his high-risk (and potentially
high-return) investment strategy, without being subject to Jan's or her
lawyers' concerns or interference ever again." (3/24 RT 91: 16-93:6,
107:22-111:23; 3/28 RT 141:21-142:4; AA V:798; AA VI: 1044-1045
[~ 2.6].)
Jan admitted she understood that the Agreement was fixing her
wealth, while giving Ron financial freedom. (6/18 RT 179:11-24,181:24
182:9; 6/29 RT 40:3-41:24.) She had seen how Ron had almost lost
everything in the aftermath of the Los Angeles riots and a prior merger.
(3/28 RT 151:22-25.)
5. The Agreement achieves an economic tradeoff that
each party desired: Jan bargains for and receives
financial predictability and liquidity, limiting her
risk, while Ron bargains for and receives potential
for high growth albeit with correlative risk.
The Agreement afforded Jan the economic security and limited risk
she desired and afforded Ron the upside economic potential he desired. It
8 For example, when the merger involving Food4Less (see § C.2,below), was first announced in November 1997, it was a risky proposition.(7/2 RT 175:11-176:7; see also 3/28 RT 248:14-21; 7/2 RT 62:2-63:6[describing how the deal had fallen apart and only come back together inlate October], 64:14-65:5 [deal presented serious FTC complications],69:1-2 [same].) Although the merger ultimately closed, had it fallen apart,the financial consequences could have been disastrous-as Jan well knew.(3/28 RT 151:22-25; 7/2 RT 175:11-176:7.) The Agreement was designedto insulate Jan from precisely that kind of risk. (7/2 RT 175:11-176:7.)
15
did so by effectively assigning the couple's assets (and the risks associated
with its fluctuations) to Ron and providing Jan with set substantial amounts
then and in the future. (AA V:802-804, 806, 826-838 [~~ 2.1,2.2.2,2.4,
2.5,3.1, asset schedules].)
Jan confirmed that "the most significant factors and critical elements
for Jan in entering into [the] Agreement [were] that it provide[d] her with
liquidity and predictability and reduce[d] her risk of potential loss."
(AA V:799 [~E]; 6/18 RT 189:1-14.) That's exactly what Jan received
under the Agreement.
a. The Agreement gives Jan economic security
and liquidity, with minimal risk.
Consistent with Jan's goals, the Agreement afforded her the
following:
• An entitlement to receive tax-free, lump-sum payments totaling
$30,014,134, the amount representing one-half the tax-effected value
of the assets acknowledged by the Agreement to be community
property." (AA V:803 [~2.2.2].) These payments were due
9 Jan's lawyer acknowledged that it was appropriate for Ron to seekto discount the assets to after-tax value, as Ron would incur capital gain taxwhen he liquidated the assets to make Jan's tax-free payments. (6/30 RT44:15-46:8.) The trial court, an experienced former superior court familylaw judge, found "that parties frequently consider the tax-effected values ofassets in negotiating a division of their assets by agreement, and that suchapproach was not unfair or extraordinary here." (Exh. A:788 [~ 60].)
16
whenever Jan wanted to receive them or, absent such a request, if
either party filed for divorce.'? (Ibid.)
• An entitlement to receive annual 5% interest on the $30 million sum,
with such interest accruing every year after 1997. (AA V:803
[~2.2.2].) At the present time, Jan's entitlement, including accrued
interest, is in excess of $40 million.
• An entitlement to receive $1 million a year plus having Ron pay all
her living and other family expenses, for as long as the couple lived
together. (AA V:804, 811 [~~ 2.4,8.4].)
• An entitlement to receive a house of Jan's choice (for up to
$3 million, in 1997 value) to be purchased by Ron as her separate
property, in the event she might later separate from Ron. (AA V:805
[~ 2.12].)
Jan knew her rights were being fixed by the Agreement and she was
satisfied with and accepted the arrangement. (6/18 RT 181:15-182:9.)11
10 The Agreement provided that if either Jan or Ron died while themarriage was intact, the Agreement would be "of no force or effect" and theassets would be divided pursuant to California law. (AA V:809 [~ 5.2];3/23 RT 124:24-126:9; 3/24 RT 15:2-16:2.)
11 During trial and on appeal, Jan's lawyers tried to make much ofRon's unwillingness to collateralize the $30+ million obligation withparticular assets (e.g., 3/24 RT 44:24-46:5; see also Appellant's OpeningBrief ["AOB"] 41-42), but Jan believed Ron would honor his promise and,in any event, she had the right to receive her $30+ million at any time.(6/29 RT 150:14-21; AA V:803 [~2.2.2]; AA VI:1041.)
17
b. The Agreement gives Ron the right to control
the couple's property with freedom to invest
as he wished, with him keeping all gains and
suffering all losses.
In exchange for Jan's receiving $1 million a year, plus her right to
one-half of the tax-effected value of the community assets ($30+ million) in
the event either requested a property division, plus her right to a home, Ron
received the right to sole management and control of all their assets.
(AA V:803, 804 [,-r,-r 2.2.2,2.5],806 [3.1]') Ron was to bear the risks of any
future losses regarding such assets, but he would reap the rewards of any
profits. (AA V:799, 804 [,-r,-r F, 2.3]; see also 3/28 RT 132:10-134:15,
142:12-143:1; 7/2 RT 175:11-176:7; see AA V:990 [Jan's lawyer
unsuccessfully proposes that Jan share in any "great increase" in community
property assets]; AA VI: 1041 [proposal rejected by Ron].)
Jan fully understood that she was relinquishing her interest in the
couple's assets in exchange for $30+ million tax free, whether or not Ron's
net worth declined and whenever she demanded it. (6/18 RT 179:11
185:10, 190:1-5.) As the Agreement recited, Ron desired financial freedom
to make investments "which could yield high returns but which carry the
risk ofsignificant loss," and Jan understood-as Recital F reflects-that the
upside, which could be significant, would belong to Ron. (AA V:798,
emphasis added, 799 [,-r F].)
The Agreement confirmed as Ron's separate property ownership in
entities holding interests in two supermarket chains, Smith's and
Dominick's. (AA V:806 [,-r 3.1.1], 836-838.) Ron had claimed that these
18
and other assets were his separate property, accruing to him after his 1991
separation from Jan. (3/24 RT 127:21-129:9,134:18-136:13; 6/16 RT
90:17-24, 125:5-19.) Jan had disagreed, claiming the couple did not
separate until June 10, 1997 (the date she filed her petition for dissolution).
(AA V:799 [,-[ E].) The Agreement compromised these opposing claims,
with Jan agreeing "not [to] count[] Smith and Dominick assets as
community property" (AA V:990 [,-[ 3]; see also 6/30 RT 46:9-18;
AA V:806 [,-[ 3.1.4: determination of these assets as Ron's separate
property "is a material term of this Agreement" which Jan "knowingly and
voluntarily consents to"]), and with Ron agreeing to relinquish his separate
property claims to his Beverly Hills home ("Green Acres"), art work, and
portions of his Food4Less stock (AAV:828-829; 3/24 RT 127:21-129:13;
3/28 RT 129:13-22)Y
The trial court found that the parties' respective positions regarding
the date of separation and the actual values of the marital assets were
asserted in good faith and that the Agreement represented a reasonable
compromise of those positions. (Exh. A:788 [,-[ 63].)13
12 At the time Jan entered the Agreement, she understood that theSmith's and Dominick's interests were valued at $87 million after tax (i.e.,$27 million more than the tax-effected $60 million value assigned to thecommunity property assets). (AA V:893, 897 [disclosures in original draftagreement]; see also AA V:806 [,-r 3.1.4 [acknowledging Smith's andDominick's as having "great value"].) Jan knew her counsel had advocatedto Ron's counsel that Jan would prevail at trial if the date-of-separationissue were tried. (AA V:973-975, 977 [letter "cc'd" to Jan], 982-983.) Sheknew that prevailing on that issue would make "a substantial and materialdifference in the value of the community estate." (AA V:798-799 [,-r B];6/30 RT 43:9-16.)
13 The Agreement also resolved a dispute over whether Jan hadauthorized Ron to sign certain documents for her. (AA V:805 [,-r 2.8]; see
(continued...)
19
B. Jan's Contemporaneous Assessment Of The Agreement:
While Not Effectuating An Equal Split, It Was Fair And
Met All Of Jan's Needs In The Manner She Desired.
In a handwritten statement that Jan personally prepared and read at a
meeting attended by the parties and their counsel in early September 1997,
Jan stated that while the "[A]greement ... given its value or 'bottom line'
when compared to [her and Ron's] net worth as a couple, is certainly not
equal," her part of the deal was "more than enough for a person to live
comfortably on for many years ..." and she had "no wish to continue [her]
marriage based on monetary gain ...." (AA VI:1203; see also 6/18 RT
74:18-76:1; 6/29 RT 121:5-8,125:3-15; AA V:992 [~~ 4,3.14: Jan's
attorney viewed Smith's and Dominick's as community property, to be
ceded to Ron "as part of a negotiated settlement"].)
At trial, Jan claimed she did "not recall" whether she thought the
Agreement was fair. (6/18 RT 185:14-19.) However, her recollection was
"refreshed" by her deposition testimony that she believed the Agreement
was fair in 1997. (6/18 RT 185:20-186:20.) Thereafter, she admitted that,
in 1997, she believed the Agreement was fair. (6/18 RT 186:4-8.)
The trial court found that Jan had obtained what she bargained
for-financial security. (Exh. A:782 [~40].) It found that, in light of Jan's
goals and desires, the Agreement was "fair and equitable." (Exh. A:787
13 ( ...continued)3/24 RT 7:25-8:10,162:5-166:22,168:11-172:12; 6/29 RT 42:5-46:25.)Although Jan claims Ron forged her signature on those documents (AOB 34), the facts are that she had no problem with Ron's signing for her and thatthe asserted dispute was instigated by her lawyers. (3/24 RT 162:5-166:22,169:24-170:9.)
20
[~60].) The court further concluded that Jan received protection from
declining asset values and that "the amount [Jan] would receive under the
Agreement is so large in absolute terms that it is not unlikely that a rational
person could comfortably reach this conclusion." (Exh. A:787 [~ 56].)
C. J an Extensively Investigated And Knew The Pertinent
Facts Prior To Entering The Agreement.
Not only did Jan know and understand the terms of the Agreement,
as well as its benefits and tradeoffs, she also knew the facts on which it was
premised.
1. Jan's extensive investigation and knowledge of the
facts.
Jan's legal team actively conducted its own independent
investigation of Ron's assets, the adequacy of his disclosures, and his
business activities." The investigator produced a three-volume report, one
volume of which alone consisted of300 pages. (AA V:986; see also
AA VI: 1137.) Jan never shared the results of any of these investigations
with Ron. (3/24 RT 110:1-19.)
14 E.g., 6/29 RT 19:3-13,32:22-34:18; 6/30 RT 40:2-19; seegenerally AA V:840-851, 920-928 (attorney billing records showinginvestigations, especially: AA V:846 [7/6/97: "Search on Lexis for newsstories re Ronald Burkle"], 850 [9/3/97: "analysis of financial informationprovided" in draft Agreement], 850-851 [9/5/97: "review and analysis ofprivate investigators reports re parties assets: determine accuracy of assets;determine whether all assets have been listed in the Postmarital Agreement;interoffice conference with Barry T. Harlan re assets not listed inPostmarital Agreement"]).
21
Ron did nothing to impede Jan's team in its investigations. (6/29 RT
91:21-23; 6/30 RT 39:12-17; 7/2 RT 80:1-5.) Moreover, Ron provided Jan
with Schedules of the community and separate property assets and his
estimates of their values. (AA V:826-835, 837-838.) The trial court found
the valuations Ron submitted were made in good faith (Exh. A:780-781
[~32]) and that there was no material change in the value of community
assets listed in the Schedules between the June 1997 valuation date agreed
to by the parties and the date the Agreement became final on November 22,
1997 (Exh. A:784 [~ 50]; see 3/23 RT 106:19-107:7, 134:14-135:2; 3/24 RT
146:10-14; 3/28 RT 126:2-127:15); and that there was no material change
in the value of the Food4Less stock (Exh. A:784 [~ 50]; see 3/24 RT
194:19-21,197:14-20; 7/2 RT 94:10-13). The trial court also found it was
reasonable for the parties to have set a fixed valuation date in June 1997.
(Exh. A:782-783 [~ 43J.Ys
When Jan's counsel requested more information and assurances
regarding Ron's valuations, Ron responded by providing extensive
footnotes explaining the assumptions upon which he reached his valuations.
(3/23 RT 105:1-13; AA VI:1042 [~2], 1079-1093.) The footnotes
included, for example, detailed explanations of appraisals, valuations,
receivables, and bad debts. (AA V:831-835, 838; AA VI:1079-1093.)
They informed that certain companies ("Yucaipa Companies"), through
IS The parties had agreed to value assets as of June 6, 1997-a datea few days before Jan first filed for dissolution. (3/23 RT 130:6-131:19;3/24 RT 9:11-11:5.) A fixed valuation date needs to be set in maritalestates having major assets because the values inevitably fluctuate, and ifthey are not pegged to a set date, the parties end up constantly"renegotiating and run the risk ofproblems all the way through and neverget an agreement done." (3/24 RT 9:21-23.)
22
which Ron managed various interests, had "management contract retainers"
and "earn substantial fees in connection with its acquisitions." (AA V:832
[note 14].)
Moreover, Ron offered Jan and her team unobstructed access to any
books, records or information they desired "together with personnel to assist
[them] in reviewing the documentation." (AA V:859; see also 3/23 RT
100:6-16; 7/2 RT 80:20-82:7, 184:10-24, 186:15-187:1.) These records
contained all that Jan or her team could possibly have wanted to know about
Ron's finances and business dealings; they included the documentation
supporting the Schedules and footnotes Ron had submitted; they included
information about ongoing merger efforts; and they supplied verification as
to the accuracy of the Schedules. (6/16 RT 47:8-17; 7/2 RT 80:16-82:7,
95:6-13, 183:13-184:9, 187:17-191:6.) Although Ron's offer to provide
such access remained open the whole time of the negotiations, Jan's team
never chose to look at these records. (3/28 RT 108:6-14; 6/30 RT 39:18
40:1; 7/2 RT 81:1-82:7.)
Jan claims that Ron's disclosures contained several omissions or
discrepancies. (AOB 8-9,21, 60-61.) But all were either explained to the
trial court's satisfaction or were immaterial. (See Exh. A:780-781, 782, 784
[,-[,-[ 32, 42, 49]; see also § II.D.2, below.)
2. Jan knew about the mergers at the time they
occurred.
One of Jan's central claims was (and continues to be) that she was
kept in the dark about two events not mentioned on Ron's Schedules-the
23
merger of Smith's (which she agreed was Ron's separate property) into
another publicly traded grocery-store chain, Fred Meyer, and the subsequent
merger of Fred Meyer with Food4Less (agreed to be community property).
(7/2 RT 64:8-69:2.y6
At trial, Jan testified that she "didn't recall" Ron ever telling her
about the mergers and that she didn't otherwise know about them. (6/18 RT
96:10-97:10; 6/29 RT 52:24-58:14, 153:2-11, 163:1-20.) The evidence was
otherwise, overwhelmingly so. That Jan knew about both mergers is
established again and again by the evidence, including the following:
• Ron told Jan about the mergers. (3/24 RT 176:2-15, 198:18
199:5; 3/28 RT 230:18-231:8; 7/2 RT 56:21-64:2, 70:10-71:7.)
• The mergers were important events involving many of Jan's and
Ron's mutual friends. (3/24 RT 138:23-139:16, 198:18-199:5;
3/28 RT 219:7-16, 237:14-238:3; 7/2 RT 61:16-64:2.) Ron and
Jan talked about the mergers and about the people involved all
the time. (Ibid.) Even according to Jan, Ron would tell her about
his acquisitions. (6/29 RT 55:7-10.) And she learned even more
when people around her commented about seeing Ron's name in
the paper in the fall of 1997 regarding Ralphs. (6/29 RT 64:23-
65:9.)
• The Smith's-Fred Meyer merger was publicly announced in May
1997, before Jan filed her first dissolution petition, and it closed
in early September, two months before Jan signed the
16 The Food4Less merger involved a third supermarket chain aswell: QFC, known as Hughes in Southern California. (7/2 RT 64:3-65:5,68:3-5.)
24
Agreement.'? (3/24 RT 139:17-140:14; 7/2 RT 56:6-20.) Ron
told everyone at a September 6 meeting, with both Jan and her
counsel present, that he was flying to the closing of the Smith's-
Fred Meyer merger the next day. (7/2 RT 56:2-57:5.)
• When Ron returned from the Smith's-Fred Meyer closing, he
and Jan watched a videotape of the closing. (7/2 RT 57:18-
59:25.)
• After the Smith's merger, Ron became the Chairman of the
Board of the merged entity, Fred Meyer. (3/24 RT 140:20-24;
7/2 RT 158:23-159:5.) Given his controlling interest in
Food4Less, there was a general expectation that Fred Meyer and
Food4Less would merge. (3/24 RT 194:22-195:4; 7/2 RT
155:17-156:4.) And, as expected, that merger was publicly
announced November 6-the day after Jan signed the Agreement,
but two weeks before the Agreement became binding with Ron's
signature. (AA V:798, 821; 7/2 RT 84:11-85:23.)
• Jan was present at the September 6 negotiating meeting, when
her counsel floated the idea of Jan obtaining "upside" in a
Food4Less merger, but Ron declined because Jan was unwilling
to take the downside. (3/28 RT 132:4-134:15, 142:18-143:1; 7/2
RT 54:24-56:1,171:22-176:7.)
• Jan's lawyer floated the merger "upside" idea once again, this
time in writing in late September; he was again rebuffed.
17 The valuation of Smith's (and later Fred Meyer) was publicknowledge as those stocks were publicly traded, with any fluctuations intheir stock price readily available. (3/24 RT 172:16-173:9.)
25
(AA V:990-991; AA VI 1041.) Counsel's letter specifically
inquired about a Ralphs/Hughes merger. (AA V:990.) Hughes
was part of the eventual three-way merger with Ralphs and Fred
Meyer. (See note 16, above.)"
• Ron was constantly flying around the country to handle merger
negotiations. When Jan packed Ron's bags for him, Ron and Jan
discussed the merger meetings Ron was about to attend." (3/28
RT 230:18-231:8; 7/2 RT 61:6-10, 70:18-71:7.)
• Ron took Jan on at least two of these trips where he met with
different groups to discuss the mergers. (7/2 RT 69:20-23,
70:13-17.)
• At a party the couple threw in late October, Ron and many of the
couple's friends, who were also involved in the Food4Less/Fred
Meyer merger, spent the day in the corner-to the irritation of
their spouses-discussing the merger, which was then threatening
to unravel. (7/2 RT 62:12-64:2.) Ron apologized to Jan and
explained the reason he was huddled up with the others. (7/2 RT
63:19-64:2.)
• News of the Food4Less merger made local and national headlines
on November 6, the day after Jan signed the Agreement
IS The trial court declined Jan's invitation to consider her counsel'sinquiries about the mergers to be merely a lucky guess. (7/6 RT 190:4192:3.)
19 Jan's testimony that she had no idea where Ron, with whom shewas newly reconciling, was going on his many trips and that he "[c]ouldhave been in Russia" for all she knew (6/29 RT 53:14-18) was inherentlyincredible.
26
(AA V:821), but still two weeks before Ron signed (AA V:798,
821; 7/2 RT 85:1-23). Jan read the L.A. Times article about the
merger to Ron over the phone. (7/2 RT 86:1-87:25.)
• A few days after the Food4Less merger announcement, Jan and
Ron flew to New York for congratulatory events and, on return,
discussed the merger with Ron's family at dinner. (7/2 RT
90:10-93:5.)
• During the two weeks following the announcement of the
Food4Less merger, Ron and Jan talked about the effect of the
merger on Ralphs' management team, which included a friend of
theirs. (7/2 RT 88:1-11.)
• All information about the mergers was publicly disclosed and
available to Jan and her consultants in SEC documents filed in
conjunction with the announcements and closings of the mergers.
(3/24 RT 62:24-63:10, 140:6-14; 3/28 RT 248:14-249:7; 7/2 RT
67:4-9, 157:21-158:4.)
• Although people around Jan often commented to her that they
had read about Ron in the paper (6/29 RT 55:7-23, 64:23-65:9),
Jan claimed, at trial, that she didn't hear about the Food4Less
merger as she "didn't take the paper." (6/29 RT 49:9-10.) But,
Jan was impeached. The evidence showed that she regularly read
the newspapers and had learned about some of Ron's other
investments that way. (3/24 RT 173:8-9; 6/29 RT 119:1-120:4
[Jan admits to learning about Ron's Playa Vista investment from
reading the L.A. Times]; 7/2 RT 87:8-10; see also AA V:855
27
[Jan's counsel writes Ron's counsel (cc'ing Jan) that "In reading
the Los Angeles Times this morning," he learned of Ron's
intention to invest in the Playa Vista project"], 925 [attorney bill:
"review LA Times article re Dreamworks" (i.e., Playa Vista)].)
• During the two-week interval between when Jan signed and when
Ron signed, the announced Food4Less merger was widely
known. (7/2 RT 84:11-85:8 [merger prominently, publicly
announced November 6 and 7].) Although the lawyers were
tinkering with the Agreement in this two-week period, neither Jan
nor her lawyers ever informed Ron or his lawyers that they had
any doubts or concerns about the Agreement's terms, the
mergers, or Ron's disclosures. (AA VI:1115-1133.)
The bottom line is that Jan and her legal team contemporaneously
knew about the mergers. The record overwhelmingly supports the trial
court's rejection of Jan's claims of ignorance.
D. Jan Was Not Unduly Influenced To Enter The Agreement.
The trial court determined that Jan was not unduly influenced to
enter the Agreement. It found that "overwhelming[]" "credible evidence at
trial" "fully and completely rebutted" any undue influence presumption,
even had there been one. (Exh. A:782 [~41].) It further found that Ron did
not coerce, pressure or threaten Jan in any way-not physically, not
emotionally, not economically-to get her to sign the Agreement
(Exh. A:778-779 [~~ 26-27]); that Ron genuinely wanted to reconcile
(Exh. A:777 [~ 17]); that Ron never told Jan to fire her attorneys and never
28
threatened to cut Jan off financially (Exh. A:779 [~ 26]); that Jan possessed
the requisite mental capacity to enter into the Agreement at the time she
signed it (Exh. A:779 [~27]); and that there was no persuasive evidence to
support a conclusion that Jan entered into the Agreement as a result of a
depressed mental condition or for any other undue reason (Exh. A:778-779
[~~ 26-27]).
Substantial evidence supports these findings, including for example:
• Jan and her counsel acknowledged in the Agreement itself that
she was acting freely, based on the advice of her own counsel,
without relying on Ron. (AA V:799-800 [~G].) These
acknowledgments are conclusively binding on Jan. (See note 7,
above.)
• At all times, Jan was independently represented by counsel of her
own choosing, whom Ron played no role in selecting. (6/29 RT
77:25-78:14.)
• Jan acted independently, knowing exactly what she was doing
throughout. She gathered her legal team; investigated Ron's
finances; and sprang the divorce petition on Ron with great
stealth and planning." She then attempted to hamstring certain
of Ron's investments that she believed were risky. (3/24 RT
20 For example, Jan deceived Ron into believing their marriage wasimproving while her team investigated his finances. (3/24 RT 71:25-72:4;6/29 RT 14:8-21, 122:7-19; AA VI:1199.) When Ron got wind of Jan'sinquiries, Jan falsely denied any knowledge. (3/24 RT 71:19-72:18.)Concerned that Jan thereafter did not return his calls, Ron drove to Jan'sClaremont home, but the house was empty-no children, no Jan. (3/24 RT72:19-73:21.) Jan promised to return with the children, but instead sent aprocess server while attempting, unsuccessfully, to leave the state with theirchildren. (3/24 RT 73:23-76:14; 6/29 RT 9:8-10:10, 14:8-15:22.)
29
91:16-93:8; 6/18 RT 189:15-25; 6/29 RT 119:7-120:24;
AA V:855-856, 970-971.)
• Ron made sure that Jan felt no financial pressure, transferring
$100,000 into her bank account shortly after he was served with
the dissolution petition and paying all of Jan's bills submitted to
him. (6/17 RT 178:13-18; 6/29 RT 83:21-84:9.) Jan admitted
she felt no financial pressure from the time she filed the divorce
petition through the time she signed the Agreement. (6/17 RT
178:13-18; 6/29 RT 84:1-9,90:20-91:2.)
• During the course of their reconciliation, Jan proceeded
deliberately and cautiously. When Ron formally proposed a
reconciliation in July, Jan declined. (3/24 RT 84:11-15,89:12-
91:12,106:25-107:13; 6/17 RT 178:19-179:8 [Jan says yes to
Ron's first offer to reconcile]; AA V:899-890 [Jan writes Ron
that she has reconsidered].) Only eventually did Jan decide that
she wanted to reconcile. (3/24 RT 149:3-150:25; 3/28 RT
176:22-177:6; 6/17 RT 183:3-184:14; 6/29 RT 13:9-14f1 Jan
and the children did not move in with Ron until after she was
satisfied with the Agreement's basic terms. (3/24 RT 144:1-
146:9; 6/16 RT 182:2-10; 6/18 RT 82:20-83:9.)
• Ron honored Jan's request that all negotiations be through their
respective lawyers. (See § A.2, above.) Negotiations of the
21 Jan suggests that Ron engineered a romantic cruise to sway Jan'sfeelings. (AOB 50.) In fact, the cruise was a long planned socialcommitment with friends, a repeat of one that they had taken a year earlier.(6/17 RT 183:3-184:14.)
30
Agreement's terms spanned more than two months, with various
drafts being exchanged. (AA V:989-1040; AA VI:1041-1135.)
At any time during this period, Jan could have elected not to
proceed.
• Ron repeatedly discouraged Jan from any precipitous action,
telling her that she "needed to talk to her attorney" (3/24 RT
144:6-22) and insisted she should not sign the Agreement in his
presence, but only at her attorneys' office with their advice (3/28
RT 213:20-214:11; 6/18 RT 94:10-14; 7/2 RT 74:17-77:17).
• Although her legal team handled the details of the negotiations,
Jan remained informed as to the issues. Her lawyers' time
records revealed that she communicated regularly with them.
(6/29 RT 19:3-13,30:5-6,32:22-34:18; AA V:840-851, 920-928;
see also AA V:977 [lawyer's letter "cc"d to Jan].)
• At a day-long negotiating session, Jan observed negotiations
about significant aspects of the Agreement, including
collateralizing the $30+ million payment obligation with
particular assets, the tax-effect valuation of assets, and "what was
community, and what was separate and why." (6/30 RT 42:16
44:13; see also 3/24 RT 141:2-143:1; 6/29 RT 37:3-39:13;
AA V:851 [billing record showing 6.5 hour meeting].) During
this session, Jan read a handwritten prepared statement and came
across as a "very bright and very strong" individual possessing
full control of her faculties and emotions. (7/6 RT 19:2-12; see
also 3/24 RT 141:13-142:4; AA V:1197-1204.)
31
.. Jan admitted that Ron never told her not to investigate
independently. (6/29 RT 91:21-23.) She admitted that Ron never
threatened her physically. (6/29 RT 91:3-5.) She did not recall
ever telling Ron that she felt he had forced her to sign the
Agreement. (6/29 RT 87:19-89:6.)
.. At trial, Jan identified only two things as the cause of her claimed
"stress and duress" in entering the Agreement, namely, that Ron
had made wild accusations about her attorney and that Ron had
told her to trust him rather than her attorneys. (6/29 RT 86:25
87:16,128:17-130:8; see also 6/18 RT 91:20-94:5) Ron denied
both claims. He denied ever criticizing Jan's attorneys or
interfering with her relations with them. (7/2 RT 77:2-80:12.)
He denied threatening her or pressuring her in any manner. (7/2
RT 77:2-80: 15.) The trial court believed Ron and disbelieved
Jan. (Exh. A:778-779 [~26].)
.. The week before Jan signed the Agreement, she spent several
hours going over the final copy with her certified family-law
specialist lawyers, and she ultimately signed at their office
without Ron present. (6/18 RT 95:12-16; 7/2 RT 82:8-24; 7/6 RT
9:8-10:5; AA VI:1094.) Ron was unaware when Jan was signing.
(7/2 RT 82:8-83:18.) Ron was in no hurry to sign, waiting
another two weeks. (AA V:821 [Ron signs November 21].)
.. Jan's attorney certified that he had advised Jan with respect to the
Agreement and that Jan had acknowledged she understood her
rights. (AA V:824.)
32
E. Over A Five-Year Period, Jan Accepts Millions Of Dollars
In Benefits Under The Agreement, All The While
Knowing The Matters She Now Claims Were Concealed
And Never Uttering A Single Complaint.
Consistent with the Agreement's underlying purpose, Jan and Ron
reconciled in 1997 and lived together as husband and wife until the end of
2001-over four years after the Agreement was executed. (6/18 RT 156:8
157:8.) The court specifically found that Ron's intent to reconcile was
genuine. (Exh. A:777 ['Il17].)
Several months after entering the Agreement, Jan-already knowing
about the supposedly undisclosed mergers-felt that Ron had not been
sincere about reconciling, that the attempt to reconcile had been a
ruse-contrary to the trial court's finding that Ron had been sincere. (6/29
RT 92:22-94:24, 110:3-112:8, 154:24-155:23, 160:5-16.) Jan felt so
strongly about this that she returned a ring Ron had given her when they
were reconciling. (6/29 RT 97:20-99:8.)
Despite her misgivings, as well as her knowledge about the mergers
and the widespread publicity that surrounded them, she remained with Ron,
without raising any issues about nondisclosure of assets and without
complaining that she felt she had been unduly influenced into signing the
Agreement. She continued to accept Ron's $1 million annual property
payments, again without a single complaint. (6/18 RT 154:1-155:22; 6/29
RT 100:19-109:18; AA V:901, 904, 914; see also AA V:804 ['Il2.4].)22
22 At trial, Jan asserted that Ron never actually fulfilled hisobligation to pay $1,000,000 per year. (3/28 RT 81:15-82:23; seeAOB 13.)
(continued...)
33
Also without protest from Jan, Ron paid all family living expenses, as per
the Agreement. (6/17 RT 78:1-17, 144:20-150:7; 6/29 RT 65:10-66:6;
AA V:811 [~ 8.4].)
In December 2001, more than four years after the Agreement was
executed, Jan decided to separate once again. (6/17 RT 101:19-22;
AA V:1171.) At her request, Ron wired $1.4 million, as required by the
Agreement, so she could purchase the house she had chosen as her separate
property. (6/17 RT 38:15-39:20; AA VI:1172; see AA V:805 [~2.12].)
She moved into her new home in April 2002. (6/18 RT 156:15-157:5.)
Again, Jan voiced no complaint to Ron.
Jan stayed in touch with her lead attorney, Mr. Harlan, whose office
helped arrange for her home purchase. (6/29 RT 80:22-81 :7; 7/2 RT 50:8-
18.) And, in June 2003, Jan commenced the instant dissolution proceeding.
(AA 1:5-6.) This was at least five and a half years after she learned of the
mergers; five years after she suspected Ron had not been sincere about the
reconciliation; one and a half years after Jan decided to separate; and 14
months after she moved into the new house provided for her under the
Agreement.
F. The Present Proceeding.
Jan commenced the present dissolution proceeding in June 2003, six
years after her initial dissolution proceeding. (AA I:1, 5.) The trial court
22 ( ...continued)The trial court found otherwise. (Exh. A:784-785 [~51]; see AA V:901,914; AA VI: 1172; AA VII: 1209-1349; 6/16 RT 165:24-167:22; 6/29 RT100:19-109:18.)
34
granted Ron's motion to enforce the private-judge dispute resolution
provision in the Agreement and the parties and their counsel ultimately
stipulated that the Hon. Stephen M. Lachs, a retired Superior Court judge
"highly experienced in family law matters" (AOB 19), would preside as
judge pro tempore. (AA 1:221-222,226-231; AA V:814.) Trial as to
whether the Agreement was valid and enforceable was conducted over ten
days intermittently spread over a five-month period and included both live
and videotaped deposition testimony. (E.g., 3/23 RT 55:23-72:15 [Jan's
impeaching videotaped deposition testimony].)
At trial, Jan declined to call Mr. Harlan or any other member of her
legal team to testify as to their knowledge of the facts or their advice,
although portions of Harlan's deposition testimony were read into the
record. (6/29 RT 176:12-194:3; 6/30 RT 18:19-57:8.) Invoking attorney-
client and work-product privileges, Jan objected to any questioning with
respect to what her team knew, did not know, or advised."
In a 17-page statement of decision, Judge Lachs determined the
Agreement was "valid and enforceable." (Exh. A:775 [~7].) He
determined that Jan entered the Agreement "freely and voluntarily" in
"exercise of her own free will"; that Jan did not rely on any representation
by Ron; that Ron "did not conceal assets or significant financial information
from" Jan; that "overwhelming" evidence established that Jan was not
23 E.g., 6/29 RT 30:12-24 (Ron's counsel blocked from asking aboutJan's conversations with investigator), 39:8-20 (Ron's counsel blockedfrom asking whether Jan ever told her lawyers not to represent or help her);6/30 RT 5:7-11:21 (Ron's counsel blocked from asking what Jan wrote herlawyers, supposedly on Ron's request); 7/2 RT 51:6-15 (Ron's counselblocked from asking about Jan's communications with counsel).
35
subjected to any undue influence; and that Jan's knowing acceptance of the
Agreement's benefits over a four-plus year period and her delay in seeking
rescission constituted ratification, estoppel and laches, which barred her
attempt to set aside the Agreement. (Exh. A:775, 780, 782-784 [~~ 6, 32,
37,38,46-48, 59].)
The trial court observed that Jan would not have challenged the
validity of the Agreement if the value of the assets had gone down, rather .
than up. (3/28 RT 37:25-38:14; see also 1/21 RT 75:17-76:21.) If that had
occurred, the court doubted that Jan would have been insisting on
rescinding the Agreement and taking less than $30 million. (3/28 RT
37:25-38:14.)
The trial court's findings were set forth in a tentative decision, a
proposed statement of decision, and in a 17-page final statement of
decision. (AA IV:650-654, 684-699, 773-789.) Jan filed 20 pages of
objections to the court's findings and conclusions and demanded that the
court reconsider. (AA IV:702-739.) Jan failed to point to any material
omitted issue or ambiguity that was not ultimately addressed in the final
statement of decision. (AA IV:702-737, 740-753, 773-789.)
The trial court entered an order confirming the Agreement's validity
and enforceability. (AA IV:792-793.) This interlocutory appeal followed.
(AA IV:792-794; see Cal. Rules of Court, rule 5.180.)
36
LEGAL DISCUSSION
I. THE ORDER THAT THE AGREEMENT IS VALID AND
ENFORCEABLE SHOULD BE AFFIRMED SUMMARILY:
THE FINDINGS THAT JAN'S RESCISSION ACTION IS
PRECLUDED BY DISPOSITIVE AFFIRMATIVE
DEFENSES-RATIFICATION, ESTOPPEL, AND
LACHES-ARE NOT CHALLENGED BY JAN AND, THUS,
ARE BINDING ON APPEAL.
In addition to finding the Agreement valid and enforceable (Exh.
A:775, 780-781 [~~ 6-7,32]), the trial court also found that the affirmative
defenses of ratification, estoppel, and laches barred Jan from contesting the
Agreement's validity and enforceability. (Exh. A:783-784, 787 [~~ 48, 57,
59].)
Jan neither mentions nor challenges the propriety of the affirmative
defense findings. Thus, each defense must be presumed established as a
matter of law. And, since each defense is a complete, dispositive bar to
Jan's attempted rescission, the order holding the Agreement valid and
enforceable must be affirmed on each of these independent, unchallenged
grounds.
A. The Trial Court Expressly Found That The Affirmative
Defenses Of Ratification, Estoppel, And Laches Precluded
Jan From Attacking The Agreement's Validity.
The trial court found that Jan, by her conduct, "ratified the
Agreement and is estopped to deny the validity and enforceability of the
37
Agreement at this late juncture" (Exh. A:784 [~ 48]); it further found that
her claims are barred by laches (Exh. A:787 [~59]). According to the trial
court's findings:
• At all pertinent times, Jan was informed of the facts she claimed
she didn't know and which form the basis of her rescission claim,
e.g., the Smith's and Food4Less mergers. (Exh. A:775, 780-781,
783 [~~ 6(b), 32, 46-47].)
• Jan accepted benefits under the Agreement for years before first
raising any claim of invalidity. (Exh. A:783-784 [~ 48].)
• Jan's delay was unreasonable, as she "waited over five years to
complain about any aspect of the Agreement, which is evidence
that she felt the Agreement was fair, given the obvious and
notorious success of [Ron's] post-Agreement ventures."
(Exh. A:784 [~ 48].)
• Ron "detrimentally relied upon the promises and representations
made by [Jan] in the Agreement by, among other things,
complying with the Agreement for years and accumulating
property with the understanding that under the Agreement it
would be his separate property." (Exh. A:787 [~ 58].)
One would not know from reading Jan's brief that any of these
findings were made. Not once does Jan mention them.
38
B. The Ratification, Estoppel And Laches Findings Preclude
Jan's Equitable Attack On The Validity Of The
Agreement.
Jan sought equitable relief, namely, nullification and rescission of an
agreementthat she executed. (AA 1:6; AA VII: 1350; e.g., Advanced Micro
Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 390 [rescission is a form
of equitable relief]; Gill v. Rich (2005) 128 Cal.AppAth 1254, 1264
["Rescission is an equitable remedy"]; 3 Witkin, Cal. Procedure (4th ed.
1996) Actions, § 124, p. 191 ["The traditional action for rescission, i.e., to
have a rescission adjudged, is equitable"].)
Ratification, estoppel, and laches are each complete, dispositive
defenses to equitable claims:
• This is true of ratification. (E.g., Saret-Cook v. Gilbert, Kelly,
Crowley & Jennett (1999) 74 Cal.AppAth 1211, 1225-1227
[plaintiff sought to rescind settlement agreement claiming she
lacked contractual capacity; held, rescission denied as plaintiff
ratified the agreement by accepting benefits after she regained
contractual capacity]; Gedstad v. Ellichman (1954) 124
Cal.App.2d 831,835 [ex-wife who did not seek to rescind for
more than one and one-half years after knowing of husband's
alleged fraud ratified the agreement and waived the fraud] .?4
24 See also: Hagge v. Drew (1945) 27 Cal.2d 368, 382-383(purchaser ratified sale agreement by going through with the sale afterknowledge of facts allegedly concealed); Civ. Code, §§ 1588 ("A contractwhich is voidable solely for want of due consent, may be ratified by asubsequent consent"), 1589 ("voluntary acceptance of the benefit of atransaction is equivalent to a consent of all the obligations arising from it,
(continued...)
39
• This is true of estoppel. (E.g., Giacomazzi v. Rowe (1952) 109
Cal.App.2d.498, 501-502 [spouse estopped from claiming rights
in community property she had previously agreed she had no
interest in]; Estate ofWarner (1914) 168 Cal. 771, 775 [if wife,
"with knowledge of ... right (to rescind prenuptial contract),
continues thereafter to accept from the other party payments due
thereunder, the right of such person to rescind the contract for
that breach is thereby barred'tj.)"
• This is true oflaches. (E.g., Nealis v. Carlson (1950) 98
Cal.App.2d 65,68-69 [laches barred wife from vacating final
divorce decree obtained by husband's false affidavit because, had
she acted promptly instead of waiting thirteen months after she
knew the relevant facts, the husband could have filed new
affidavit showing he had promptly cured the default]; Godfrey v.
Godfrey (1939) 30 Cal.App.2d 370,380-381 [laches barred
putative husband from avoiding agreement to pay wife on the
ground that they weren't legally married, when, "with full
knowledge of the circumstances" surrounding their marriage,
24 ( ••• continued)so far as the facts are known, or ought to be known, to the personaccepting") .
25 See also Lemat Corp. v. American Basketball Assn. (1975) 51Cal.App.3d 267,276-277 (ABA estopped to avoid technically invalidindemnity contract where it had received and retained benefits of thecontract); Evid. Code, § 623 ("Whenever a party has, by his own statementor conduct, intentionally and deliberately led another to believe a particularthing true and to act upon such belief, he is not, in any litigation arising outof such statement or conduct, permitted to contradict it").
40
husband "acquiesced in (performing agreement), without
objection, for a period of eight years"].)26
As one court summarized, "one is not permitted to stand by while
another develops property in which he claims an interest, and then if the
property proves valuable, assert a claim thereto, and if it does not prove
valuable, be willing that the losses incurred ... be borne by the opposite
party. This thought was expressed in one case by the following language:
'If the property proves good, I want it; if it is valueless, you keep it. '"
(Livermore v. Beal (1937) 18 Cal.App.2d 535,549.)
This precisely reflects our case. Jan bargained for and obtained
security; did not want to incur risk; stood by while Ron took all the risk; and
now wants the benefits Ron gained from taking risk even though she agreed
they belonged to Ron. The trial court properly refused to allow this to
happen.
C. Where, As Here, An Appellant Does Not Challenge Case
Dispositive Findings, Such Findings Must Be Deemed
Conclusively Established On Appeal.
Jan does not challenge any of the trial court's ratification, estoppel
and laches findings. "A trial court's findings are binding on appeal where
26 See also Hamud v. Hawthorne (1959) 52 Cal.2d 78,86 (lachesbarred relief where plaintiffs waited over five years after deed was recordedto seek relief, acting as "opportunists" trying to gamer unanticipated gains);Fam. Code, § 1101, subd. (d)(3) (laches is expressly available as defense toa spouse's alleged breach of fiduciary duty with respect to communityproperty); cf. Fam. Code, § 1617 (premarital agreements: statute oflimitations applicable to claims for relief tolled during marriage, but laches,estoppel and other equitable defenses limiting time for enforcement stillavailable).
41
the appellant does not expressly challenge them." (BGJ Associates, LLC v.
Wilson (2003) 113 Cal.AppAth 1217, 1230, emphasis added.) Such
findings are "presumed correct." (Building Industry Assn. ofSan Diego
County v. State Water Resources Control Bd. (2004) 124 Cal.AppAth 866,
887; see also Corenevsky v. Superior Court (1984) 36 Cal.3d 307,321.)
Jan's "failure to raise an argument in [her] opening brief [as to the
dispositive findings] waives the issue on appeal." (Dieckmeyer v.
Redevelopment Agency ofHuntington Beach (2005) 127 Cal.AppAth 248,
260; see also Locke v. Warner Bros., Inc. (1997) 57 Cal.AppAth 354,368
[failure to challenge ruling on appeal waives challenge].)
As a matter of law, the order affirming the validity and enforceability
of the Agreement should be affirmed summarily. (Hagge v. Drew, supra,
27 Cal.2d at pp. 382-383 [affirming ratification determination where "(n)o
contention is raised as to the sufficiency of the evidence to support the
finding"]; 1119 Delaware v. Continental Land Title Co. (1993) 16
Cal.AppAth 992, 1004 [summarily affirming judgment on cause of action
as to which no argument presented in opening brief].)
D. Even Had Jan Challenged The Ratification, Estoppel, And
Laches Findings, They Would Be Impervious To Attack
Because They Are Supported By Substantial Evidence.
Because this Court is not presented with any challenge to the trial
court's ratification, estoppel and laches findings, it need not assess the
substantial evidence that supports them. (Building Industry Assn. ofSan
42
Diego County v. State Water Resources Control Bd., supra, 124
Cal.App.tth at p. 887, fn. 14.)27
Nonetheless, the findings are supported by substantial evidence."
For more than four years, Jan accepted from Ron millions of dollars
of payments and a house as his performance under the Agreement and she
allowed Ron to take major investment risks-not shared by her-without
ever placing Ron on notice that she believed the Agreement was invalid or
that she would later claim a right to share in the upside of the risks he
took." Jan did this even though:
• She knew about the Smith's and Food4Less mergers (the
supposed nondisclosure of which is a centerpiece of her claim)
27 Should Jan try to raise the issue in her Reply Brief, the Courtshould decline to consider it. "Fairness militates against [the Court's]consideration of any arguments an appellant has chosen not to raise until itsreply brief, and the authorities holding to that effect are numerous." (Reedv. Mutual Service Corp. (2003) 106 Cal.App.dth 1359, 1372, fn. 11.)
28 Had Jan challenged the findings, review would be limited todetermining whether substantial evidence supported them. (E.g., Gedstad v.Ellichman, supra, 124 Cal.App.2d at pp. 835-836 ["we are bound by thetrial court's finding of laches because if appellant can be said to have madeany showing of excuse of delay at all, said showing was certainly not suchthat it proves as a matter of law that she had not forfeited her right to attackthe validity of the property settlement agreement"]; White v. Moriarty(1993) 15 Cal.App.dth 1290, 1295-1296 [upholding ratificationdetermination based on findings supported by substantial evidence];Marriage ofCesnalis (2003) 106 Cal.App.dth 1267, 1277 [affirmingequitable estoppel determination based on substantial evidence].)
29 During the period after Jan learned of the mergers, Jan acceptedmore than $4 million in payments from Ron. (AA VI: 1172,VII:1209-1349.) She acknowledged in writing her satisfaction with Ron'sannual $1 million payments. (AA V:901, 914; see also 6/29 RT100:19-109:18; AA VII: 1209-1349.) When Jan decided to separate inDecember 2001, she directed Ron to wire $104 million, as required underthe Agreement, to purchase the house she chose. (6/17 RT 41:8-23;AA VI:1171; seeAA V:805 [~2.12].)
43
before she signed the Agreement and before it became final on
November 22, 1997. (See Statement of the Case, § C.2.)
• By 1998, she suspected (albeit, unreasonably) that Ron had been
"just pretending" about wanting to reconcile. (6/29 RT 94:8-12;
see also 6/29 RT 154:24-155:23.) She sought rescission on the
ground that the reconciliation was a ruse (AOB 46), yet she
believed it was a ruse five years before she sought rescission, but
never voiced a complaint.
• Pursuant to the Agreement she bought a house funded by Ron
and moved into it in April 2002. (6/29 RT 156:15-157:19.) She
remained in contact with her lawyers; indeed, Harlan's office
helped her with the purchase. (6/29 RT 80:22-81:7; 7/2 RT 50:8-
51:5.) Yet, she waited another 14 months before retaining a new
lawyer and claiming that the Agreement was invalid." (AA 1:3,
5-6; see also 6/29 RT 157:15-22.)
Jan's delay in claiming the Agreement was invalid and seeking
rescission, while continuing to accept the Agreement's benefits,
substantially prejudiced Ron. Based on his reliance on the Agreement's
validity, Ron continued to honor its terms by making all required payments
to Jan, while believing he was free to pursue aggressive investment
endeavors, taking whatever risks were involved and suffering the
consequences of his decisions, in order to obtain any gains yielded by the
risks he took. (E.g., 3/28 RT 142:12-143:1; 7/2 RT 175:11-176:7.) If Jan
30 After reconciling with Ron, Jan admitted she was not subject toany arguable undue influence. (6/29 RT 153:2-21, 173:2-24.)
44
early on had informed Ron that she had any reservations or that she
believed the Agreement was invalid, Ron would have had the opportunity
promptly to address any such issues and to adjust his conduct accordingly.
Jan, however, chose to remain silent.
The Agreement afforded Jan exactly what she bargained to
receive-economic security, with limited risk; she knew she was
relinquishing the upside potential that accompanies economic risk-taking.
Knowing all the facts, Jan remained silent for more than four post
Agreement years so she could reap both the security of her bargain and
attempt to share the benefits she promised Ron could keep as his own.
The trial court properly rejected Jan's transparent effort to have the
best of all worlds. As the trial court sensibly observed, had Ron's risky
investments turned out disastrously, Jan would not now be foreswearing the
$40+ million (including interest) provided her in the Agreement and
insisting on a smaller share of community assets. (3/28 RT 37:25-38: 14.)
"[I]n litigation as in life, you can't have your cake and eat it too." (Guess?,
Inc. v. Superior Court (2000) 79 Cal.AppAth 553,555 & fn. 1; see Holland
v. Pyramid Life Ins. Co. ofLittle Rock (5th Cir.1952) 199 Fold 926,929
[party could not wait until the risk covered by life insurance policy had
expired before seeking to rescind and to obtain refund ofpremiums].)
The unchallenged and fully supported findings of ratification,
estoppel and laches compel that the order upholding the validity and
enforceability of the Agreement be affirmed summarily.
45
II. THE ORDER UPHOLDING THE AGREEMENT AS VALID
AND ENFORCEABLE SHOULD BE AFFIRMED
SUMMARILY: THE FINDINGS THAT JAN WILLINGLY
ENTERED INTO THE AGREEMENT WITH FULL
KNOWLEDGE OF THE MATERIAL FACTS AND WITHOUT
UNDUE INFLUENCE ARE UNCHALLENGED AND ARE
BINDING ON APPEAL.
In upholding the Agreement's validity and enforceability, the trial
court expressly determined that Jan entered the Agreement freely and
voluntarily, with full knowledge of the material facts, with a complete
understanding ofthe Agreement's effect, and without undue influence.
(Exh. A:775, 778-779, 780-781 [~~ 6,26-27,32].)
Jan ignores these findings and the substantial evidence that supports
them. Jan nowhere contends that the findings are insufficient to support the
determination that the Agreement is valid and enforceable, nor does she
challenge the sufficiency of the evidence to support the findings. Indeed,
Jan readily admits she has not complied with the substantial evidence rule."
Rather than reciting and addressing the evidence in the light most
favorable to the findings, as the law requires, Jan simply tells her side of the
story. This she cannot do. The unchallenged findings must be deemed
supported as a matter oflaw.
3! In a footnote, Jan asserts that "[t]he trial court's factual findings infavor of Ron, as set forth in its Statement of Decision, are not entitled to thedeference normally given to such findings under the substantial evidencerule." (AOB 3, fn. 1.) In Section II.B, below, we demonstrate why there isno merit to either of Jan's reasons for not complying with the substantialevidence rule.
46
A. There Being No Challenge To Any Of The Trial Court's
Findings, This Court Must Presume That The Record
Contains Substantial Evidence To Sustain Each Finding.
Jan wants this Court to act as the trier of fact. She wants it to
consider and accept her lopsided tale even though the trial court rejected it.
Of course, this Court cannot supplant the fact finder.
The governing principles-ignored by Jan- are set forth in
Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, as follows:
• "It is well established that a reviewing court starts with the
presumption that the record contains evidence to sustain every
finding of fact." (ld. at p. 881, internal quotation marks omitted.)
• If an appellant chooses to attempt to rebut this presumption, the
appellant must"... demonstrate that there is no substantial
evidence to support the challenged findings." (Ibid., emphasis in
original, internal quotation marks omitted.)
• "A recitation of only [appellant's] evidence is not the
'demonstration' contemplated" by the standard of review. (Ibid.)
• If appealing parties contend that "some particular issue of fact is
not sustained, they are required to set forth in their brief all the
material evidence on the point and not merely their own evidence.
Unless this is done the error is deemed to be waived." (Ibid.,
emphasis in original, internal quotation marks omitted.j"
32 Countless cases agree. (E.g., Marriage ofFink (1979) 25 Cal.3d877, 887 [applying same rules in marital dissolution appeal]; Bickel v. CityofPiedmont (1997) 16 Cal.4th 1040, 1053 ['''[T]he power of an appellatecourt begins and ends with a determination as to whether there is any
(continued...)
47
Jan cannot escape these principles. They command that each of
Judge Lachs' unchallenged findings must be deemed supported by
substantial evidence and that each is beyond challenge on appeal. As with
the ratification, estoppel and laches findings discussed in Section I above,
Jan's case should end here.
B. Jan Has Not Presented Any Viable Reason For Ignoring
The Substantial Evidence Rule.
Jan tries to dismiss the most elementary of appellate rules-the
substantial evidence rule-in a perfunctory footnote. (AOB 3, fn. 1.)
Without barely any analysis or explanation, she proclaims the rule does not
apply for two reasons: that the trial court supposedly misallocated the
burden of proof as to undue influence and that the findings were negated by
her objections to the statement of decision. (Ibid.; see also AOB 20, 32-33.)
Each reason fails.
32 ( ...continued)substantial evidence, contradicted or uncontradicted,' to support thefindings below. [Citation.] [The court] must therefore view the evidence inthe light most favorable to the prevailing party, giving it the benefit of everyreasonable inference and resolving all conflicts in its favor .... '[Citation.]," internal quotation marks omitted].) The testimony of a singlewitness, even if contradicted, suffices as substantial evidence; it is not theappellate court's function to re-weigh credibility. (E.g., Scott v. Pacific Gas& Electric Co. (1995) 11 Cal.4th 454,465 [appellate court does not reweigh the evidence]; Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388,398[same]; Marriage ofMix (1975) 14 Cal.3d 604, 614 [testimony ofparty mayalone suffice]; 2,022 Ranch, LLC v. Superior Court (2003) 113 Cal.App.4th1377, 1387 ["The appellate court may not weigh the evidence, resolveconflicts in the evidence, or resolve conflicts in the inferences that can bedrawn from the evidence. If there is substantial evidence in favor of thefinding, no matter how slight it may appear in comparison with thecontradictory evidence, the finding must be affirmed"].)
48
1. Jan's burden-of-proof assertion does not negate
application of the substantial evidence rule.
Jan claims the substantial evidence rule does not apply because the
trial court misallocated the burden of proof as to undue influence. (AOB 2
3, fn. 1,20, 32-33.) The premise is both irrelevant and untenable.
a. Jan's assertion is irrelevant because the trial
court found that, no matter how the burden
of proof was allocated, overwhelming
evidence established that there was no undue
influence.
Jan's premise is irrelevant. This is because the trial court expressly
found that nornatter which party had the burden ofproof as to undue
influence, the evidence "overwhelmingly" established that any presumption
of undue influence was "completely and fully rebutted." (Exh. A:782
[,-r 41].) Jan never grapples with this finding. Rather, she tries to dismiss it
as being "speculative and simply meaningless." (AOB 38, fn. 8.)
This doesn't work.
The trial court heard the evidence and determined that it
overwhelmingly negated any presumption of undue influence that may have
arisen. It is Jan's burden as appellant to "demonstrate that there is no
material, credible evidence or no reasonable inference from the evidence to
support the challenged findings." (Barney v. Fye (1957) 156 Cal.App.2d
103, 107, emphasis added, internal quotation marks omitted; see discussion
49
in § I.C, above.) Jan doesn't even try to do so. Nor could she if she tried.
(See, e.g., §§ A-D of Statement of the Case.)
Under the law, the substantial evidence rule applies to support the
presumption-rebuttal finding, just as it applies to all other findings.
"[W]hether or not the spouse gaining ... an advantage has overcome the
presumption of undue influence is a question for the trier of fact, whose
decision will not be reversed on appeal if supported by substantial
evidence." (Wei! v. Wei! (1951) 37 Ca1.2d770, 788; see also Shadow
Traffic Networkv. Superior Court (1994) 24 Cal.AppAth 1067, 1087
[question whether party has met burden under judicially created
presumption is one for trial court, "not a reviewing court"]; Barney, supra,
156 Cal.App.2d at p. 108 ["For an appellate tribunal to say upon the record
in the instant case that the trial judge was not justified in determining that
the presumption of fraud and undue influence was overcome by respondent,
would in our opinion be a usurpation of the legitimate function of the trial
court"].)
The trial court's finding that overwhelming evidence negated any
presumption of undue influence completely refutes Jan's assertion. The
finding is binding without regard to which party had the burden of proof.
(Conservatorship ofDavidson (2003) 113 Cal.AppAth 1035, 1061-1062
[regardless of whether presumption ofundue influence shifted burden of
proof, substantial evidence supported trial court's finding that there was no
undue influence]; Marriage ofFriedman (2002) 100 Cal.AppAth 65, 72
[appellate court is "bound by this factual finding" that presumption of
undue influence was "dispelled"]; Leathers v. Leathers (1946) 77
50
Cal.App.2d 134,140-141 [regardless of whether presumption of undue
influence shifted burden of proof, substantial evidence, binding on appeal,
supported trial court's finding of no undue influence]; Marsiglia v.
Marsiglia (1947) 78 Cal.App.2d 701, 706-707 [regardless of presumption
of undue influence, substantial evidence "sustain(s) the (trial) court's
findings, including, in effect, that plaintiffhad full knowledge of all the
facts necessary for her protection prior to the time she executed the property
agreement and grant deed; that she executed them with full understanding
of their contents and meaning, and with the benefit of the independent
advice of her attorney"].)
Nor is there merit in Jan's subsidiary contention that only clear and
convincing evidence can overcome the asserted presumption. (AOB 30-
31.) The law is to the contrary: "The ... burden ofproof [to overcome an
undue influence presumption] is by a preponderance of the evidence."
(Estate ofStephens (2002) 28 Ca1.4th 665, 677.)33 But even if-contrary to
the law-a higher standard ofproof were applicable here, that standard was
unquestionably satisfied by the finding that any presumption was overcome
33 See also Conservatorship ofDavidson, supra, 113 Cal.AppAth atpp. 1061-1062 ("even if we were to conclude the presumption of undueinfluence was activated under these facts and the burden of proof did shift,respondent would then only have been required to prove the absence ofundue influence by a preponderance of the evidence"); Estate ofSarabia(1990) 221 Cal.App.3d 599, 605 (same); Evid. Code, § 115 ("Except asotherwise provided by law, the burden ofproof requires proofby apreponderance of the evidence"). Gold v. Greenwald (1966) 247Cal.App.2d 296, relied on by Jan, was decided before Evidence Codesection 115 mandated the preponderance standard. (See Marriage ofPeters(1997) 52 Cal.AppAth 1487, 1492 [the "Supreme Court has repeatedlycautioned against making too much of the choice of language in judicialopinions describing burdens of proof without taking into consideration thestatutory preference for proof by preponderance in civil action"].)
51
by "overwhelming[]" proof. (Exh. A:782 [,-r 41]; Roth v. State Bar (1953)
40 Ca1.2d 307,314 [equating "overwhelming" and "clear and convincing"
proof].) Jan does not even try to show how the "overwhelming" proof
establishing no undue influence failed to satisfy any clear and convincing
standard that might have applied.
b. Jan's assertion is wrong: No presumption of
undue influence was ever triggered because,
as the trial court found, the factual predicate
for such a presumption was not proven.
In addition to being irrelevant, Jan's presumption theory also is
untenable. According to Jan, the Agreement, on its face, is presumed to be
the product of undue influence because "of the fiduciary relationship
between Ron and Jan." (AOB 20-21.) If that were true, every transaction
between a husband and wife automatically would be subject to a\
presumption of undue influence. But this is not the law. The trial court was
absolutely correct in rejecting that theory. (Exh. A:782 [,-r 40(d)].)
Like all other contracts, written agreements between spouses are
presumptively valid." Whether conditions exist that would trigger an
undue influence presumption is a question for the trier of fact: "It is for the
trier of fact to determine whether the presumption will apply and whether
34 E.g., Civ. Code, §§ 1614 (consideration presumed for writtendocument), 3545 (the presumption is that "(p)rivate transactions are fair andregular"); Fam. Code, §§ 721, subd. (a) (spouses may enter into agreementswith each other); 1500 ("The property rights of husband and wifeprescribed by statute may be altered by a ... marital property agreement");see Adams v. Adams (1947) 29 Ca1.2d 621,624.
52
the burden of rebutting it has been satisfied." (Estate ofSarabia, supra,
221 Cal.App.3d at p. 605.)
In order to trigger an undue influence presumption, the party
advocating such a presumption-here, Jan-must first demonstrate, to the
satisfaction of the trier of fact, that the other party-here, Ron-gained an
unfair advantage. (Fam. Code, § 721(b) [neither spouse shall take "unfair
advantage" of the other, emphasis added]; Civ. Code, § 1575 [undue
influence consists of unfair advantage].) "The claim that a presumption of
undue influence arose by reason of the marriage is untenable. The
evidence, in addition to a showing of marriage relationship, must also show
such unfairness ofthe transaction as will tend to establish that the wrongful
spouse made use of the confidence reposed for the purpose of gaining an
unreasonable advantage over the mate." (Snyder v. Snyder (1951) 102
Cal.App.2d 489, 492, emphasis added.) Our Supreme Court has confirmed
this rule. (Marriage ofSaslow (1985) 40 Ca1.3d 848,863-864, citing and
quoting with approval both Snyder and Civ. Code, § 1575.)
None of the cases Jan cites supports her assertion that undue
influence must be presumed if Ron obtained any benefit whatsoever under
the Agreement. Rather, each case is premised on factual findings
demonstrating that one spouse did gain an undue advantage over the other;
none involved a finding, as here, that the agreement was fair and equitable,
with mutual benefits."
35 See Marriage ofDelaney (2003) 111 Cal.App.4th 991,996 (trialcourt found undue influence arose where husband conveyed his separateproperty residence to wife as joint tenant; appellate court affirmed: "whenany interspousal transaction advantages one spouse to the disadvantage of
(continued...)
53
Nor does Probate Code section 16004 support Jan's assertion.
(AOB 25.) The reason is simple: Family Code section 721 specifically
defines the mutual fiduciary obligations owed between spouses as "subject
to the same rights and duties of nonmarital business partners, as provided in
Sections 16403, 16404, and 16503 of the Corporations Code ...." While
section 721 also refers to other sections of the Probate Code, it
conspicuously does not mention Probate Code section 16004.
Jan's reliance on Bradner v. Vasquez (1954) 43 Ca1.2d 147 (see
AOB 25-26) is similarly misplaced. That case is an attorney-client
transactional case-involving a one-way fiduciary duty owed by attorney to
client-decided under the precursor to section 16004; it is not a spousal
case governed by Family Code section 721. And, even Bradner recognized
that a party seeking to trigger a presumption of undue influence still had to
establish that the other party had gained some advantage over him. (Id. at
35 ( ...continued)the other, the presumption arises that such transaction was the result ofundue influence," emphasis added); Marriage ofLange (2002) 102Cal.App.4th 360,363-364 (trial court found presumptive undue influencewhere wife obtained a "financial advantage" over husband by obtainingadditional security, in the form of a note with interest, for funds contributedto improve community property where no consideration given for theadditional security; appellate court affirmed holding that presumptionapplies "if (spouse's) position is improved, (or she) obtains a favorableopportunity, or ... otherwise gains, benefits, or profits" ); Marriage ofHaines (1995) 33 Cal.App.4th 277,287,293-296,301-302 (trial courtfound undue influence by a preponderance of evidence; wife "transferredher interest in real property to (husband) for his cosignature on anautomobile loan-clearly inadequate consideration for execution of thequitclaim deed"; appellate court affirmed: "when an interspousal transactionadvantages one spouse over the other, a presumption of undue influencearises," noting that Fam. Code, § 721 requires unfair advantage, emphasisadded); cf. Marriage ofBarneson (1999) 69 Cal.App.4th 584, 588-589(dicta: presumption issue never reached).
54
p. 152 ["There was evidence from which the court could reasonably
conclude that Bradner obtained an advantage from the Vasquezes by the
contract at the time it was made"]; see cases cited in note 35 above, all
resting on trial courtfactual findings that a presumption applied.)
Jan did not satisfy either the section 721 or even the Bradner
standard here. Judge Lachs determined, at the outset, that he could not
conclude from the face of the Agreement itself that one party gained an
advantage, let alone an unfair one, over the other. (1/21 RT 55:14-56:10;
2/29 RT 84:7-85:12; 3/23 RT 47:17-48:14.) After hearing evidence from
both sides, Judge Lachs found as a matter of fact that no presumption was
triggered because the Agreement was "fair and equitable" to both Jan and
Ron-that each party got exactly what each wanted out of the Agreement
and that "[t]he Agreement provided mutual advantages" to each. (Exh.
A:782, 787-788 [~~ 40, 60].) In short, Jan did not satisfy her burden of
establishing that a presumption of undue influence arose.
Jan does not challenge the factual sufficiency of Judge Lachs'
findings; they are therefore binding on appeal. (See discussion in §§ I.C,
II.A, above.)
Additionally, Judge Lachs found that Jan and Ron dealt at arm's
length, each represented by 'independent counsel, something that was
apparent on the face of the Agreement. (Exh. A:781, 788 [~~ 32, 61].) This
factor alone generally avoids any presumption ofundue influence. (E.g.,
Estate ofCover (1922) 188 Cal. 133, 144 [husband "avoid[s]" presumption
of undue influence, ifhe "deal[s) with [wife} at arm's length and as he
would with a stranger, all the while giving her the opportunity of
55
independent advice as to her rights in the premises," emphasis added];
accord Collins v. Collins (1957) 48 Cal.2d 325,330; see also Colton v.
Stanford (1890) 82 Cal. 351, 372-373 [no presumption of undue influence
where fiduciaries deal at arm's length represented by counsel].)
Bottom line: Jan did not prove the factual predicate for any
presumption to arise in this case. Moreover, the automatic presumption of
invalidity that Jan advocates would make bad policy. It would undermine
the strong public policies favoring marital harmony, reconciliation, and the
resolution of issues. (See § IILA, below.) It would automatically plant in
all marital agreements seed of their potential future undoing and make them
inherently unreliable, since all such agreements would be presumptively
invalid. It would promote litigation, even though the purpose of such
agreements is to resolve disputes.
c. Even if (contrary to both fact and law) the
trial court had somehow misapplied the
burden of proof, Jan still would not be
entitled to reversal of the order upholding
the Agreement.
Even if Jan could somehow overcome these principles, she still
could not prevail. There are two reasons why this is so.
First, Jan nowhere contends or establishes that she suffered prejudice
resulting from any misapplied burden ofproof. Demonstrated prejudice, of
course, is a prerequisite to reversal (Cal. Const., Art. VI, § 13), even where
the burden of proof is improperly allocated. (E.g., Sargent Fletcher, Inc. v.
56
Able Corp. (2003) 110 Cal.AppAth 1658, 1674 ["Even were we to conclude
the court should have given a burden-shifting instruction, we also would
conclude that Sargent Fletcher was not prejudiced by the court's failure to
do so in this case"]; Buzgheia v. Leasco Sierra Grove (1997) 60
Cal.AppAth 374, 393-394 [judgment may not be reversed for misallocated
burden of proof absent appellant's demonstration of harm]. )36
Here, the absence ofprejudice is conclusively established not merely
by Jan's failure to address the issue, but also by the trial court's
unchallenged finding that any presumption was rebutted by overwhelming
evidence. (E.g., Murphy v. Atchison, T & sr. Railway (1958) 162
Cal.App.2d 818,822-824 [failure to instruct jury on presumption of due
care that would have favored plaintiff was harmless in light of abundant
evidence rebutting it].?7
Second, even if-contrary to the record-Jan had asserted and
shown prejudice, she still would not prevail because the unchallenged
findings that her rescission claim is barred by the complete defenses of
ratification, estoppel and laches (see § I, above) stand independently of any
issues concerning undue influence; thus, they survive without regard to the
burden ofproof on undue influence. Where, as here, two completely
36 The cases Jan relies on to claim that she need not show prejudicepredate the Supreme Court's determinative decision in Soule v. GeneralMotors Corp. (1994) 8 Cal.4th 548, making clear that prejudice is aprerequisite to reversal. (See also Marriage ofSteiner (2004) 117Cal.AppAth 519,526-527.)
37 To show prejudice, Jan would have to recite all the evidence,something she has not done. (Marriage ofMcLaughlin (2000) 82Cal.AppAth 327,337 [appellant has burden of demonstrating prejudicebased on record as a whole]; Paterno v. State ofCalifornia (1999) 74Cal.AppAth 68, 105-106 [same].)
57
independent grounds support a ruling, the ruling must be affirmed as long
as one ground is legally supported. (E.g., Scottsdale Ins. Co. v. Essex Ins.
Co. (2002) 98 Cal.AppAth 86, 92 [alternative finding supported by
substantial evidence prevails even where other finding not supported]; In re
Jonathan B. (1992) 5 Cal.AppAth 873, 876 [lack of support for one of
several findings does not require reversal].)
2. Jan's objections to the statement of
decision-directed at issues the trial court in fact
resolved-do not negate application of the
substantial evidence rule.
Equally without merit is Jan's assertion that her objections to the
statement of decision somehow negate the force of the trial court's findings.
(AOB 3, fn. 1; see also AOB 20.) Nothing could be further from the truth.
Jan fundamentally misperceives what a statement of decision is
supposed to accomplish, and she misunderstands the rules that govern
when, in limited, specifically-defined circumstances articulated by statute,
an unresolved objection can negate an inference favorable to some findings.
A statement of decision is "sufficient if it fairly discloses the court's
determination as to the ultimate facts and material issues in the case."
(Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.AppAth 1372,
1380, emphasis added.) A trial court is "not required to address how it
resolved intermediate evidentiary conflicts, or respond point by point to the
various issues posed in appellant's request for a statement of decision"
(Muzquiz v. Emeryville (2000) 79 Cal.AppAth 1106, 1126, emphasis in
58
original) and "is not required to make an express finding of fact on every
factual matter controverted at trial, where the statement of decision
sufficiently disposes of all the basic issues in the case" (Bauer v. Bauer
(1996) 46 Cal.AppAth 1106, 1118). (Accord Marriage ofGarrity &
Bishton (1986) 181 Cal.App.3d 675,686-687 ["A trial court in rendering a
statement of decision under Code of Civil Procedure section 632 is required
only to state ultimate rather than evidentiary facts," citation and internal
quotation marks omitted]; see generally 7 Witkin, Cal. Procedure (4th ed.
1997) Trial, § 411, p. 470.)
If, and only if, (a) a statement of decision fails to dispose of an
ultimate fact or issue essential to disposition of the case or if it is
ambiguous on such a point, and (b) a party objects to that omission or
ambiguity, and (c) the trial court fails to clarify the ambiguity or rectify the
omission, then-and only then-will it "not be inferred on appeal ... that
the trial court decided in favor of the prevailing party as to those facts or on
that issue." (Code Civ. Proc., § 634, emphasis added.)
Jan completely ignores this test. She does not set it out, nor does she
even try to satisfy it. She has not demonstrated that the statute applies.
Thus, it must be inferred on appeal that the trial court decided in Ron's
favor as to all issues.
In fact, Jan could not have satisfied the statutory test even if she had
tried. Her 34 pages of objections to the Statement of Decision did not
identify material omitted issues or ambiguities. (AA IV:702-721.) Rather,
Jan simply advanced "objections" that amounted to reargument of her case
and reassertion of her legal positions. (AA IV:740-751; Exh. A:788 [~65].)
59
However, reargument of positions lost at trial cannot possibly allow a losing
party to negate the findings against her.
In her Opening Brief, Jan identifies only six specific objections that
she claims the trial court ignored. (AOB 38, fn. 8, 53, 65-66, 67, 73.) None
reveals an omitted or ambiguous finding of ultimate fact or an unresolved
material issue falling within section 634. For example, Jan's objection to
the trial court's finding that any undue influence presumption would have
been overwhelmingly rebutted was simply an expression of disagreement
with the court's conclusion. (AA IV:714-715; see AOB 38, fn. 8,
mistakenly citing AA IV:716 instead of AA IV:714.) While Jan bickers
with the bottom line, she does not point to any finding that was omitted or
ambiguous. Jan's remaining objections likewise fail to satisfy the
requirements of section 634. They amount to nothing more than
expressions of disagreements with findings that the trial court made or
evidentiary quibbles. None points to an unresolved omission or unresolved
ambiguity.38
38 Compare:(1) Exh. A:777, 779, 784 (~~ 19,2949: finding that the records Ron
made available to Jan would have disclosed all relevant information,including all relevant information about the mergers) with AA IV:707, 708,716 cited at AOB 65-66 (disagreeing with that finding).
(2) AA IV:724-729 cited at AOB 53 (objecting that the trial courtfailed to address whether consideration for the Agreement included theparties' agreement to reconcile or attempt to reconcile) with Exh. A:777,780-781 (~~ 17-18, 31, 33: finding that both Jan and Ron "genuinely didwant to reconcile," but that "reconciliation was not a condition of theAgreement" and that consideration for the Agreement included mutualeconomic compromises).
(3) AA IV:715 cited at AOB 73 (seeking determination of date onwhich assets were valued) with Exh. A:782 (~ 43: valuation date wasJune 6, 1997); see also Exh. A:784 (~50: finding that the relevant values
(continued...)
60
If a disappointed litigant could undermine a factual finding simply
by disagreeing with it, no deference would ever be afforded to trial court
findings. That, of course, is not the law.
The bottom line: The trial court addressed the relevant material
issues and found the necessary ultimate facts. Nothing more was required.
Because Jan has failed to identify any material omission or ambiguity, let
alone one that was objected to, section 634 does not apply. Instead, all
facts and inferences must be construed in favor of the findings and
judgment. (Marriage ofArceneaux (1990) 51 Ca1.3d 1130, 1133.)
But even had Jan established that she properly objected to, and the
trial court failed to rectify, any material omissions or ambiguities, her
position, asserting that all the trial court's findings must be rejected
wholesale, would still be utterly devoid of merit. Section 634 is far more
narrow than that. It provides that if an objection to an omission or
ambiguity is not corrected, it shall "not be inferred on appeal ... that the
trial court decided in favor of the prevailing party as to those facts or on
that issue." (Code Civ. Proc., § 634, emphasis added.)
38 ( ...continued)did not materially change between June and November).
(4) AA IV:716 cited at AOB 66 (asking what specific informationwas disclosed in the public merger announcements) with Exh. A:783-784(~~ 46-47, 49: finding that Jan knew about the mergers and that Jan couldor should readily have discovered all financial information about themergers by reviewing the information Ron made available to her,"including, but not limited to, information regarding the Yucaipa warrantsand the management agreement cancellation fee").
(5) AA IV:716-717 cited at AOB 67 (objecting to drawing aninference from lawyer's assertedly privileged refusal to testify) withExh. A:776, 783 (~~ 12,47: finding that trial court was drawing noinference from assertion ofprivilege, but inference permissible from Jan'sfailure to provide relevant evidence).
61
Not one of Jan's objections points to any specific fact or issue as to
which she claims section 634 would apply; nor did any ofher objections
point to any basis (let alone a viable basis) that would permit an appellate
court to disregard the trial court's findings carte blanche or to undermine
the trial court's findings that the Agreement is valid and enforceable and
that Jan's rescission attempt is barred by the dispositive defenses of
ratification, estoppel and laches.
C. Because Jan Chose Not To Produce (And, In Fact,
Blocked) Key Evidence Within Her Control And Central
To Her Assertions That She Lacked Knowledge And Was
Subjected To Undue Influence, She Failed To Prove Her
Case And Should Be Precluded From Advancing Such
Assertions On Appeal.
Jan's rescission claim was based on her assertions that she entered
the Agreement without knowledge of certain facts, like the mergers, and
was subjected to undue influence. By opting to seek rescission premised on
these fact-based claims, Jan voluntarily placed in issue what she knew and
what she relied on in entering the Agreement.
It is uncontroverted that Jan's legal team engaged in an extensive
investigation into Ron's finances. (See Statement of the Case, § C.1,
above.) Under the law, what Jan's legal team knew was conclusively
attributable to her. (Civ. Code, § 2332; Herman v. Los Angeles County
Metropolitan Transportation Authority (1999) 71 Cal.AppAth 819,828
[constructive notice applies to attorney-client relationship and "'is
62
irrebutable,''' quoting Powell v. Goldsmith (1984) 152 Ca1.App.3d 746,
751]; Lazzarevich v. Lazzarevich (1952) 39 Ca1.2d48,50 ["Ordinarily a
person is held to know what his attorney knows and should communicate to
him"; held, attorney's knowledge that divorce had become final imputed to
client]; Chapman College v. Wagener (1955) 45 Ca1.2d 796, 802
[knowledge of attorney negotiating agreement imputed to client].)
At trial, Jan testified she did not know certain facts, like the mergers.
But Jan's testimony, standing alone, did not (and could not legally)
establish Jan's lack of knowledge. The reason is, as the cases just cited
hold, that her legal team's knowledge was conclusively attributed to her
and, thus, what she knew necessarily included what her legal team knew. In
short, in order for Jan to prove her assertion that she lacked knowledge, she
had to prove two things: that she was personally unaware of the facts and
also that her legal team was unaware. One without the other could not
suffice to prove Jan's lack of knowledge.
Jan's proof failed here. She never offered any evidence showing
what her legal team knew or did not know. There being no proof that Jan's
legal team lacked knowledge of the facts as to which Jan disclaimed
knowledge (e.g., the mergers), the bottom line is that Jan failed to prove her
case. She didn't prove she didn't know.
Our point here has nothing whatever to do with drawing an improper
inference based on Jan's assertion of attorney-client privilege. This is so
because Jan did not have to assert any privilege in order to elect to call the
members of her own legal team to testify in support of her case in chief.
That decision was Jan's and Jan's alone; it was not compelled by anything
63
Ron did; it was not driven by any effort by Ron to obtain privileged
information. Asserting a privilege relates to preventing someone else from
obtaining confidential information; it has nothing to do with a decision by
the privilege holder as to whether or not to introduce evidence essential to
proving her case.
Here, Jan made a tactical decision not to call members ofher legal
team to prove an essential element of her rescission case-lack of
knowledge. Her decision resulted in a failure of proof as to that element:
Jan never proved she lacked knowledge. Even if the trial court had
believed her story (it didn't), Jan's evidence would not have sufficed to
support a finding that she lacked knowledge.
But even if testimony from Jan's legal team were not indispensable
to her case, her decision not to introduce evidence as to what the team
learned from its investigations would still have permitted a trier of fact to
infer that the team's testimony would not have been favorable to Jan's
position; this inference would not arise from Jan's asserting the privilege,
but rather it would arise from her decision not to call key witnesses (solely
within her control) whose testimony would have strongly supported Jan's
case if she were telling the truth.
Finally, decisional law uniformly establishes that Jan's case could
properly have been dismissed by reason of her assertion ofprivilege. Under
the law, a plaintiff who places a fact in issue cannot preclude the other side
from inquiring fully about that issue. If the plaintiff asserts a privilege in
such circumstances, the proper remedy is to dismiss her case.
64
For each of these reasons, now to be more fully explained, Jan
cannot claim on appeal that she lacked knowledge of the mergers or any
other facts.
1. By seeking rescission, Jan placed her and her legal
team's knowledge directly at issue.
The centerpiece of Jan's rescission claim is her assertion that she
was not fully informed of the pertinent facts, such as the mergers, and was
improperly influenced to sign the Agreement without being adequately
informed.
It is uncontroverted that, over a six-month period, Jan's legal and
investigative team collected, reviewed, and analyzed on Jan's behalf
extensive information on Ron's finances, including, for example,
preparation of a three-volume investigative report. They also
communicated regularly with Jan. (Statement of the Case, §§ C and D,
above.)" And, as demonstrated above, what Jan's legal team knew was
attributable to Jan.
Lack of knowledge and justifiable reliance were essential elements
of Jan's rescission case. (E.g., Alliance Mortgage Co. v. Rothwell (1995)
39 What little Ron knew about Jan's team's investigation wasgleaned largely from Harlan's and Pelletier's billing records, which theyvoluntarily submitted in 1997 as part of their request that Ron pay for Jan'slegal fees. (AA V:983.) These records revealed that Jan's team closelyinvestigated and scrutinized Ron's business affairs. (See, e.g., Statement ofthe Case, § C.1; see also AA V:850-851 [9/5/97 billing entry: "review andanalysis ofprivate investigators reports re parties assets: determineaccuracy of assets; determine whether all assets have been listed in thePostmarital Agreement; interoffice conference with Barry T. Harlan reassets not listed in Postmarital Agreement]; see also AA V:986;AA VI:1137.)
65
10 Cal.4th 1226, 1239, fn. 4 ["justifiable reliance ... (is) also (an) essential
elementt) of ... constructive fraud"]; Younan v. Equifax Inc. (1980) 111
Cal.App.3d 498,516, fn. 14 [constructive fraud requires proof ofboth
"nondisclosure (breach of fiduciary duty)" and "reliance and resulting
injury (causation)," that is, ignorance of the true facts]; Hogoboom & King,
Cal. Practice Guide: Family Law (Rutter Group 2005) § 9:243, pp. 9-62.11
to 9-62.12 [free and voluntary entry into agreement with full knowledge of
facts negates undue influence].)
Jan could not have been relying on Ron-justifiably or
otherwise-to disclose facts that she or her team already knew. (Cameron
v. Cameron (1948) 88 Cal.App.2d 585, 592-593, 596 [no justifiable reliance
on husband's alleged misrepresentations regarding his characterization of
certain property as separate where wife's attorneys were aware of the
problems, made their own investigations, were not denied access to any
information, and advised her to sign the agreement]; Weingarten v.
Weingarten (1989) 234 N.J.Super. 318, 325-329 [560 A.2d 1243, 1247
1248] [wife's claim that divorce settlement agreement should be set aside
on ground that she relied on husband's misrepresentation of the marital
estate's value placed her own attorney's knowledge and advice at issue].)
66
2. By reason of her election to decline to introduce
(and to preclude inquiry into) essential and highly
relevant evidence probative of Jan's knowledge of
the facts and what influenced her to act, Jan should
not be allowed to claim on appeal that she lacked
knowledge of any facts or was subjected to undue
influence.
Three separate principles combine to preclude Jan from arguing on
appeal that she lacked knowledge or that she was subjected to undue
influence.
a. By not introducing evidence of the facts
gathered by Jan's legal team in investigating
Ron's finances, Jan failed to prove a prima
facie case that she lacked knowledge; she
could not have prevailed even if (contrary to
fact) the trial court had believed her.
As demonstrated above, Jan's knowledge consisted of two
components: What she knew plus what her legal team knew.
Here, Jan only opted to present half her case. She testified to what
she claimed she knew, but she elected not to present evidence of what her
legal team knew or what they told her. Without proving what her legal
team knew or didn't know (such knowledge being attributable to Jan), Jan
never proved that she lacked knowledge. For this reason alone, Jan's claim
that she lacked knowledge was never proven. There being no factual basis
67
for Jan's claim that she lacked knowledge, this Court should not consider
the claim on appeal.
b. Jan's failure to introduce evidence as to her
legal team's knowledge of Ron's finances
permitted the trier of fact to draw an
inference adverse to Jan's claim that she
lacked knowledge.
Even if proof regarding the knowledge of Jan's legal team were
somehow not essential to Jan's proving a prima facie case as to her claim
that she lacked knowledge, such proof was, at the very least, centrally and
uniquely relevant to that issue and the issue concerning the influences that
prompted Jan to sign the Agreement.
Where, as here, Jan opted not to introduce highly probative
evidence-lying solely within her control-that was relevant to key issues
that she voluntarily placed in controversy, a trier of fact could properly infer
that such evidence, if introduced, would not have been favorable to Jan. It
is elementary that a trier of fact can permissibly view a litigant's claims
with distrust where the record reveals the witness has within his or her
control highly probative evidence that the witness fails to produce. (Evid.
Code, §§ 412, 413.tO
40 "Ifweaker and less satisfactory evidence is offered when it waswithin the power of the party to produce stronger and more satisfactoryevidence, the evidence offered should be viewed with distrust" and "[i]ndetermining what inferences to draw from the evidence or facts in the caseagainst a party, the trier of fact may consider, among other things, theparty's failure to explain or to deny by his testimony such evidence or facts
(continued...)
68
Here, the information gained through Jan's legal team's investigation
was highly pertinent as to the state of Jan's knowledge and her claim of
undue influence, yet Jan opted not to produce such evidence. Under the
circumstances, a trier of fact could properly conclude that such evidence, if
introduced, would not have been favorable to Jan. Numerous cases so hold.
(E.g., Westinghouse Credit Corp. v. Wolfer (1970) 10 Cal.App.3d 63,69
[trial court properly inferred attorney's testimony would have been adverse
to defendant seeking relief from default when defendant-who claimed
attorney failed to represent her-declined to disclose their
communications]; Shapiro v. Equitable Life Assur. Soc. (1946) 76
Cal.App.2d 75, 93-94 ["The failure to bring before the tribunal some
circumstance, document, or witness, when either the party himself or his
opponent claims that the facts would thereby be elucidated, serves to
indicate, as the most natural inference, that the party fears to do so, and this
fear is some evidence that the circumstance or document or witness, if
brought, would have exposed facts unfavorable to the party," internal
quotation marks omitted]; see generally 3 Witkin, Cal. Evidence (4th ed.
2000) Presentation At Trial, §115, pp. 153-154 [collecting cases allowing
adverse inference from party's failure to produce evidence].)
Jan's decision not to produce highly probative evidence in support of
her claims of lack of knowledge and undue influence should preclude her
from advancing such claims here.
40 ( •••continued)in the case against him, or his willful suppression of evidence relatingthereto, if such be the case." (Evid. Code, §§ 412, 413.)
69
c. Where a plaintiff places certain issues in
controversy by bringing suit, but asserts
privilege to preclude the other party from
having access to probative evidence, the
plaintiff's suit should properly be dismissed.
Where a plaintiff, such as Jan, asserts a privilege as to crucial
evidence pertinent to proving facts that she voluntarily placed in issue by
bringing suit, the case is properly subject to dismissal. The reason: A
litigant cannot have it both ways. A litigant cannot place issues in
controversy and simultaneously assert a privilege to preclude access to
information relevant to those issues.
As one court declared, a plaintiff may have "the right to stand on the
privilege, but [she has] not the right to proceed with [her] claim while at the
same time insisting on withholding key evidence from [her] adversary."
(Steiny & Co. v. California Electric Supply Co. (2000) 79 Cal.App.4th 285,
292 [dismissing claim where plaintiffs asserted trade secret privilege as to
circumstances of a settlement it wanted the defendant to pay].) Numerous
cases are in precise accord."
41 E.g., Hartbrodt v. Burke (1996) 42 Cal.App.4th 168, 174-175(dismissing plaintiffs claim where plaintiff withheld evidence under selfincrimination privilege); Dalitz v. Penthouse International, Ltd. (1985) 168Cal.App.3d 468,479 (magazine, suing for libel, could not "use the FirstAmendment simultaneously as a sword and a shield" by raising reporter'sshield to protect sources, thereby forestalling inquiry into the truth of orgood faith as to its reporting); Fremont Indemnity Co. v. Superior Court(1982) 137 Cal.App.3d 554,560 (plaintiff may not "initiate a lawsuit andthen by reliance upon the privilege against self-incrimination effectivelyprevent the party sued from getting at the facts by way of discovery, andthus prejudice preparation of his defense"; insurance bad faith claim
(continued...)
70
Having chosen to place issues as to her knowledge and the
influences that prompted her to enter the Agreement in controversy by
requesting rescission, Jan's assertion ofprivilege to preclude Ron from
gaining access to the information gathered by her legal team subjected her
claim to outright dismissal. Since the trial court could properly have
dismissed Jan's claim because she hid the ball, Jan should not be allowed to
argue here that she lacked knowledge or was subjected to undue influence.
We anticipate Jan will respond by asserting, as she did below, that
adverse inferences cannot be drawn where evidence is not produced under
claim of privilege, citing Evidence Code section 913. (7/6 RT 167:1-9;
AOB 67.) But, the argument doesn't work.
First, the trial court expressly declared it was drawing no inference
from Jan's assertion ofprivilege: "In reaching its findings, conclusions and
determinations [the trial] [c]ourt drew no inference from [Jan's]
assertion of any [attorney-client] privilege or [work-product] doctrine."
(Exh. A:776 [~12].) Judge Lachs must be taken at his word.
Second, regardless of the reason why Jan did not call any member of
her legal team, the bottom line, as demonstrated above, is that her failure to
do so resulted in her failure to prove her case. Since the knowledge of Jan's
legal team was attributable to Jan, the absence of evidence as to that
component of Jan's knowledge amounted to a failure ofproof.
Third, there were non-privileged matters as to which members of
Jan's legal team could have testified, without violating any confidence. For
41 ( ...continued)dismissed where plaintiff insured asserted self-incrimination privilege).
71
example, at the September 6, 1997, meeting attended by Jan and her
attorney, Mr. Harlan, and by Ron and his counsel, Ron testified that he
discussed the Food4Less merger (see Statement of the Case, § C.2, above)
and Mr. Harlan later referred to such merger in his September 16, 1997,
memorandum to Ron's counsel (ibid.). These were non-privileged matters
as to which Mr. Harlan could well have testified if he disagreed that the
mergers were disclosed. Not calling Mr. Harlan to testify as to this matter
permitted an inference that his testimony would not have been favorable, as
the trial court concluded."
Fourth, Jan's voluntary decision not to call team members whose
testimony was essential to her claim of lack of knowledge and highly
relevant to the other rescission issues she raised has nothing to do with the
assertion of a privilege; rather, it is a tactical decision, nothing more,
nothing less." Indeed, a party cannot even assert a privilege as to evidence
42 Judge Lachs found: "Petitioner's failure to call Mr. Harlan totestify regarding this matter at trial further supports the Court's finding thatsuch possible merger was disclosed by Respondent to Petitioner."(Exh. A:783 [~ 47].)
43 As the Law Revision Commission explained, section 913 "dealsonly with the inferences that may be drawn from the exercise of a privilege;it does not purport to deal with the inferences that may be drawn from theevidence in the case. [Evidence Code] [s]ections 412 and 413, on the otherhand, deal with the inferences to be drawn from the evidence in the case;and the fact that a privilege has been relied on is irrelevant to theapplication ofthese sections." (Law Rev. Com. com. to Evid. Code, § 412,emphasis added; see HLC Properties, Ltd. v. Superior Court (2005) 35Cal.4th 54, 62 ["While not binding, the Commission's official commentsreflect the intent of the Legislature in enacting the Evidence Code and areentitled to substantial weight in construing it"].) Thus, concluded theCommission, "there is no inconsistency between Section 913 and Sections412 and 413." (Law Rev. Com. com. to Evid. Code, § 412; see also 3Witkin, Cal. Evidence, supra, Presentation At Trial, § 115, p. 154 [Evid.
(continued...)
72
that the party has not opted to proffer, so no unfavorable inference based on
the non-assertion of a privilege could possibly have been drawn here.
Here, Jan never asserted a privilege as to the evidence she elected
not to introduce, such as the evidence concerning the knowledge gained by
her legal team as to Ron's finances. Evidence Code section 913, relied on
by Jan (AOB 67), only bars adverse inferences from the assertion of a
privilege, not from a litigant's election not to produce her strongest
evidence.
For all the reasons stated above, Jan should not be permitted to claim
on appeal that she was ignorant of the facts and was subjected to undue
influence.
D. Although Jan Raises No Tenable Substantial Evidence
Argument, Substantial Evidence Supports The Findings
That Jan Freely Entered The Agreement With Full
Knowledge of the Facts, With Full Appreciation of Its
Compromises, Benefits And Risks, And Without Undue
Influence.
As is true with the case-determinative points advanced in Section I,
above, the case-once again-could stop here. The unchallenged findings
that Jan had knowledge and was not subjected to undue influence must be
presumed correct and supported by substantial evidence. (See discussion in
43 ( ••• continued)Code, § 913 "merely prohibits comment on the claim of privilege as such; itdoes not prevent the drawing of inferences from the evidence (or lack ofit)"; citing Commission's Comments].)
73
§ I.C, II.A, above.) More fundamentally, however, as just demonstrated
(§ II.C.2.a, above), Jan failed to prove even a prima facie case that she
lacked knowledge: Since her legal team's knowledge was conclusively
attributed to Jan, her failure to call any member of her team to testify as to
its knowledge left Jan's proof on the knowledge issue fatally incomplete
and, thus, insufficient. Although these reasons alone conclusively negate
any need for this Court to examine the sufficiency of the evidence to
support the trial court's findings that Jan knew all pertinent facts and was
not subjected to undue influence, we will now briefly recite such evidence
out of an abundance of caution.
1. Substantial evidence supports the trial court's
determination that the Agreement is valid and
enforceable.
As Ron's factual recitation conclusively demonstrates, substantial
evidence supports the trial court's findings that Jan entered the Agreement
with a complete understanding of its benefits, risks and compromises,
knowing exactly what the deal contemplated (Statement of the Case,
§§ A.3, A.5, above); that Jan entered the Agreement after having
independently and fully investigated, and with full knowledge of, the
material facts (Statement of the Case, §§ A.2, A.3, C, above); and that Jan
entered the Agreement of her own free will, not because of any undue
influence (Statement of the Case, §§ A.3, D, above).
These facts-completely unchallenged by Jan on appeal-support
the trial court's findings that (a) Jan "exercised her own judgment, with the
74
advice of a team of skilled attorneys, to conclude the Agreement was
satisfactory to her" after having over six months to investigate the parties'
assets and liabilities; (b) Ron "did not conceal assets or significant financial
information from" Jan; (c) Ron made "a true and full disclosure of
community assets" and their values, and "fulfilled his fiduciary duties" of
access and disclosure to Jan; (d) Jan and her lawyers knew the relevant
facts, including the mergers; (e) Jan "did, in fact, enter into the Agreement
freely, willingly and voluntarily, and free of any fraud, duress, medical
condition or undue influence"; and (f) "the credible evidence at trial
established overwhelmingly that any [undue influenceJ presumption would
have been fully and completely rebutted." (Exh. A:775, 780-783 [~~ 32,35,
37-39, 41, 46-47J.)
These unchallenged findings and supporting evidence conclusively
establish that the Agreement is valid and enforceable, exactly as the trial
court found. (E.g., Marriage ofFriedman, supra, 100 Ca1.App.4th at
pp. 69, 72-73 [affirming validity of and enforcing agreement where "wife
understood the scope and purpose of the postnuptial agreement"]; Marriage
ofRosevear (1998) 65 Ca1.App.4th 673,686 [affirming trial court's finding,
based on substantial evidence, that wife was suffering "buyer's remorse,"
not duress, where wife was represented by competent counsel, and husband
"provided ... substantial economic documentation; informed both her
attorneys that more such documentation was located at the family residence;
and offered to assist (wife) in locating those documcnts'tj.)?'
44 See also Marriage of Wipson (1980) 113 Ca1.App.3d 136, 143(although wife was "attempting to recover from the trauma and confusion
(continued...)
75
2. Jan's evidentiary quibbles are baseless.
Rather than dealing with what really matters-the trial court's
findings and the substantial evidence that supports them-Jan presents her
own spin on a few snippets of evidence, as if doing so somehow
undermines the force of contrary findings. Once again, however, Jan
ignores the substantial evidence rule in advancing these evidentiary
contentions.
None has the slightest merit:
• Jan hypothesizes that Ron's efforts to reconcile were merely a
"ruse" to deflect the marital dissolution action to a less
"inconvenient time." (AOB 46.) But the court found otherwise.
(Exh. A:777 [~ 17].) And, overwhelming evidence-including
Jan's own testimony-establishes that Ron genuinely wanted to
reconcile. (E.g., 3/23 RT 109:22-110:6; 3/24 RT 149:4-151:18;
3/28 RT 176:22-177:6; 182:3-184:14; 6/18 RT 83:1-6; 6/29 RT
13:6-14.) Indeed, the couple remained reconciledfor over four
44 ( •••continued)normally present in a dissolution," she was far from being a "frightened,confused woman" and knowingly entered into marital settlement agreement;affirming trial court's enforcement of agreement); Wei! v. Weil, supra, 37Cal.2d at p. 787 (no undue influence where wife "fully understood thenature and legal effect of the step she was taking"); Ramirez v. Sturdevant(1994) 21 Cal.AppAth 904,917 (no undue influence "when ... thetrustee/attorney produces evidence that the transaction was conducted atarm's length with an intelligent, experienced and sophisticated client");Colton v. Stanford, supra, 82 Cal. at pp. 372-373 (no undue influence whereevidence showed that partner's widow placed no confidence in otherbusiness partners and acted exclusively upon advice of disinterestedcounsel); see generally Keithley v. Civil Service Bd. (1970) 11 Cal.App.3d443,452 (listing factors suggesting undue influence, none of which arepresent here).
76
years, until Jan decided she wanted to end the marriage. (See
Statement of the Case, § E, above.)
• Jan claims that Ron would not let her move in with him until she
signed the Agreement. (AOB 50-51.) Not so. The trial court
found that Jan was not pressured to sign the Agreement. (Exh.
A:776, 778-779 [~~ 15,26,29].) Jan testified that she never
viewed moving in with Ron as being connected with finalizing the
Agreement. (6/18 RT 81:17-21.) When Jan decided to move in
after first refusing, she did so because she was comfortable with
the couple's prospects for a successful reconciliation and with the
basic terms of the Agreement. (6/16 RT 182:2-10; 6/17
RT 182:24-184:14; 6/18 RT 82:20-83:9; AA V:899.) She did not
sign the Agreement until nearly two months after she moved in.
(AA V:821.)
• Jan contends that she was under "constant intense pressure from
Ron to actually sign the agreement." (AOB 51, citing 6/18 RT 91
95.) Ron testified to the contrary. (7/2 RT 77:2-80:15.) The trial
court believed Ron. (Exh. A:778-779 [~ 26].)
• Jan asserts that Ron "assured her that they were going to grow old
together and the agreement would never actually come into
effect." (AOB 51.) The.evidence Jan cites (6/29 RT 159-160)
says no such thing. In fact, it was Jan who testified that she
"believe[d] that [she] and Ron were going to be reconciled and
live together until" they "grow old together." (6/29 RT 160:5-9.)
There is no evidence that Ron made any such representation. In
77
any event, it is Jan who moved out and petitioned for dissolution.
(See Statement of the Case, § E, above.)
o Jan contends that it would have been "futile" for Jan to have
insisted on viewing Ron's records. (AOB 51.) But the trial court
properly excluded as speculative the evidence she cites. (6/30 RT
51:10-54:1.) Jan nowhere claims the ruling was erroneous. In
fact, Ron did make a sincere offer to open his office and Jan's
team never took him up on it. (AA V:859; 3/28 RT 108:1-14;
6/30 RT 39:18-40:1; 7/2 RT 82:6-7.) If Jan had wanted to test the
sincerity of Ron's offer, her team should have attempted to
schedule an appointment. It never did.
o In a footnote, Jan points to a cryptic note buried in an exhibit-an
exhibit the trial court did not admit into evidence (7/6 RT 47:17
24)-and claims that it showed that Ron "somehow ended up with
an additional 827,321 shares of Fred Meyer in his own personal
name" after the merger. (AOB 62, fn. 10, citing Exhibit 76
[purported printout of SEC document: Schedule 13D filed by
Fred Meyer].) Jan does not contend that the trial court erred in
excluding the exhibit. Moreover, there was no mention of this
entry at trial; no offer of proof to explain what it meant; no
opportunity for Ron to put on evidence explaining it. Indeed, Jan
did not even offer the exhibit until after both sides had rested, and
the trial court rejected it on that basis. (7/6 RT 46:24-47:23.) Jan,
of course, cannot rely on evidence that is outside the record.
(Sacks v. FSR Brokerage, Inc. (1992) 7 Cal.AppAth 950, 962-963
78
[on appeal party cannot rely on "possible theories that were not
fully developed or factually presented to the trial court," citation
and internal quotation marks omitted].)
• Jan argues that the records Ron made available would not have
revealed any information she now claims was concealed.
(AOB 65-66.) But this is total speculation, as she never bothered
to view the records. Nor is Jan's speculation supported by the
evidence she cites. (See 3/28 RT 112:5-114:2; 7/2 RT
184:3-189:25.) Moreover, her speculation is refuted by Ron's
testimony that the records he made available confirmed the assets
and values on the Schedules and contained all the information Jan
could possibly have wanted to know about the mergers,
cancellation fees, and otherwise concerning Ron's business
interests. (7/2 RT 80:16-82:7, 94:16-95:13,187:19-189:25; see
also Statement of the Case, § C.2, above.)
• Jan claims there were two inconsistencies between the Schedules
Ron provided and his supplemental financial footnotes. (AOB 7,
fn. 3; 9.) One asserted inconsistency was fully explained as a
typographical error in a footnote that did not affect the bottom
line. (7/2 RT 93:6-94:9.)45 The other asserted inconsistency was
irrelevant: the larger figure was used to value the asset, meaning
that either the asset's value was stated correctly or was overstated.
(3/24 RT 156:8-25; compare AA 837 [valuing Smith's interest at
45 The footnote mistakenly valued the Food4Less interest at $52million, whereas the true value, listed on the Schedule, was $42.5 million.(AA V:829, 831 [note 5].)
79
$45.5 million] with AA 838 [note 3: valuing interest at $31 or
$36.1 million].) Either way, the inconsistency could not have
affected Jan's decision to enter the Agreement. And, the asset in
question-Smith's stock-was something that Jan had agreed
would be Ron's separate property and, thus, it did not affect Jan's
community property entitlement."
• Jan claims there were entities (RE Management LLC and
Waterton Investments II) not reflected in the Schedules Ron
provided. (AOB 37.) The trial court found those were simply
entities that, at the time, had no value, had no assets, and were
ultimately funded with assets that had already been fully
disclosed. (Exh. A:782 [~42]; see 7/2 RT 114:10-118:20.)
• Pointing to an exhibit that was not received in evidence, Jan
complains about a supposed undisclosed rise in the publicly
available stock price of the Smith's/Fred Meyer shares between
June and November 1997. (AOB 7, 60, citing Exhibit 74.) Once
again, Jan's argument is based on a refused exhibit. (Exhibit 74;
7/6 RT 38:16-46:22.) And, once again, she makes no contention
46 Jan also claims an inconsistency between the Schedules and Ron'stestimony with respect to his interest in Food4Less. (AOB 9.) There isnone. Ron actually owned 2,834,100 shares, valued at $42 million. (3/28RT 256:7-258:4.) Ron denied his interest could be calculated as Janproposes-through rough calculations based on his average percentownership interests. (3/24 RT 190:5-191:15.) The trial court believed Ron.(Exh. A:781 [~32: Ron's estimates were "sincerely held" and"reasonable"].) Of course, all these claimed inconsistencies would havebeen apparent to Jan and her team in 1997, and thus could not have beenmaterial to Jan's decision to enter the Agreement; she either didn't care(and hence didn't ask about them), or resolved the inconsistencies throughher own investigations.
80
on appeal that the exhibit was improperly refused. Moreover, the
point is irrelevant because Jan undeniably agreed that, regardless
of value, the shares in question were to be Ron's separate
property. (AA V:990 [~3: conceding Smith's as Ron's separate
propertyj.)"?
• Jan claims that Ron failed to update the asset values in the
Schedules-which everyone agreed were to be valued as of
June 6, 1997 (see note 15, above)-to reflect the values as of the
Agreement's effective date in the end of November, after the
announcement of the mergers. (AOB 73.) Stipulating to a set
valuation date is proper. (Marriage ofHahn (1990) 224
Cal.App.3d 1236, 1239-1241.) In any event, any disclosure defect
was immaterial as the overall community property asset values
remained the same. (3/24 RT 194:19-21,197:14-20; 7/2 RT
94: 10-13.) Moreover, Ron met his duties by telling Jan about the
mergers and providing her team access to his files." In addition,
47 In any event, Ron had "no obligation to inform [Jan] of marketvalues of fully disclosed [and publicly traded] securities." (Marriage ofHeggie (2002) 99 Cal.AppAth 28,35, citing Marriage ofConnolly (1979)23 Ca1.3d 590, 598.)
48 Fam. Code, §§ 721, subd. (b)(1)&(2) (fiduciary duty includesaffording "each spouse access at all times to any books kept regarding atransaction for the purposes of inspection and copying" and "[r]enderingupon request, true and full information of all things affecting anytransaction which concerns the community property," emphasis added),1100, subd. (e) (duty to disclose and to provide access to marital assetinformation "upon request"). Jan nevertheless argues Ron had a duty underFamily Code § 1100, subdivision (d), to inform her in writing about themergers (AOB 74)-but that provision does not apply, as the merger wasnot a "sale," "exchange," "or other disposition of all or substantially all ofthe personal property used in the operation of the business."
81
the valuations were publicly known (once the Food4Less merger
was announced there was a set exchange ratio or equivalence
between Food4Less and publicly traded Fred Meyer stock, 3/24
RT 194:13-21).
• Jan claims that Ron did not disclose that the Food4Less merger
would ultimately produce significant management contract
termination fees for the Yucaipa Companies when the merger was
completed in March 1998-four months after she signed the
Agreement." (AOB 8-9,61-62; see 7/2 RT 68:19-69:2 [merger
completed 3/10/98].) But Jan knew about the Food4Less/Fred
Meyer merger before she signed the Agreement (see Statement of
the Case, § C.2) and the Schedules disclosed that Yucaipa was
community property, that it had "management contract retainers,"
and that it "earns substantial fees in connection with its
acquisitions" (AA V:830, 832 [note 14]; 3/24 RT 192:21-25; 3/28
RT 244:8-246:11).50 The management-contract fees and fees for
terminating its contracts-including those with Fred Meyer and
Food4Less-were all spelled out in Yucaipa's contracts, which
Ron made available to Jan and her team (though they chose not to
review them) and which were publicly available as well. (3/28 RT
49 Jan also claims that Yucaipa sinisterly profited by exchangingvalueless warrants for stock as part of the merger. (AOB 59.) The recordreflects, however, that the stock was in payment of Yucaipa's fees; to obtaincertain tax advantages, the warrants were canceled as part of thetransaction. (3/28 RT 253:6-256:5; 7/2 RT 197:13-198:17.)
50 The cancellation fee merely represented an acceleration ofamounts due under the remaining years of an existing contract. (3/28 RT240:20-241:65, 242:1-243:3.)
82
246:24-247:4,248:6-249:7,253:6-20; 6/16 RT 47:8-17; 7/2 RT
67:4-9,95:14-24, 188:17-189:25, 195:1-196:4.)51 Moreover, Jan's
team independently investigated Yucaipa. (AA V:841-842 [June
13 billing entry: "review oflimited asset search for Yucaipa
Companies Phase I and Phase II"], 986 [300-page asset
investigation report re "Phase II"]; see also AA V:850-851 [9/97
billing entries showing evaluation of assets listed on schedules].)
The law assumes that Jan's team obtained all the information it
required and, if Jan's team did not know of the pertinent Yucaipa
information, Jan should have called her team members as
witnesses at trial to so testify, but she elected not to do so. (See
discussion in § II.C, abovc.)?
In any event, Jan has never shown or hinted that the $2.6 million
Yucaipa value disclosed on the Schedules was inaccurate after subtracting
51 Jan may not complain when she consciously declined to viewthose records. (Boeseke v. Boeseke (1974) 10 Ca1.3d 844, 849 [wife "maynot now complain" when she was aware husband's list of assets did notdisclose all facts in his possession relating to the value, nature, and extent ofthe community property, but then declined opportunity to investigate orrequest further facts].)
52 "When one undertakes an investigation and proceeds with itwithout hindrance it will be assumed that he continued until he had acquiredall the knowledge he desired and was satisfied with what he learned."Collins v. Collins, supra, 48 Ca1.2d at p. 330, quoting Cameron v. Cameron,supra, 88 Ca1.App.2d at pp. 593-594, internal quotation marks omitted; seealso Hayward v. Widmann (1933) 133 Ca1.App. 184, 189 ["One who hasactually investigated the truth of the representation, and is given full andfair facilities for doing so, and who acts upon his own judgment andknowledge, cannot be said to rely upon the representation"].)
83
expenses.f (AA V:830; 3/24 RT 192:21-194:12; 3/28 RT 247:8-23,256:1-
5.)
For these reasons, there is no merit in any of Jan's evidence-based
arguments, all refuted by the trial court's findings, by the substantial
evidence rule, and by the rule that evidentiary rulings unchallenged on
appeal are presumed correct.
E. There Is No Merit In Jan's Contention That Findings Of
Undue Influence And Fiduciary Breach Were Compelled
As A Matter Of Law.
Jan asserts that the law required the trial court to find undue
influence and fiduciary breach. (AOB 28-32, 38-40, 57-69.) Not so. These
issues present questions of fact resolvable by-and resolved here by-the
trier of fact:
• "The issue of whether or not undue influence has been exerted
frames a question of fact." (E.g., Marriage ofDawley (1976) 17
Cal.3d 342, 354, citations omitted; accord Marriage ofBonds
(2000) 24 Cal.4th 1, 31 [collecting cases].)
• The same is true as to claims of breach of fiduciary duty. (E.g.,
Duffy v. Cavalier (1989) 215 Cal.App.3d 1517, 1536, fn. 10
[whether a person breaches a fiduciary duty is a question of fact
53 See Kids' Universe v. In2Labs (2002) 95 Cal.AppAth 870, 884 [toobtain award of lost profits, plaintiff "must show loss of net pecuniary gain,not just loss of gross revenue"].) Ron testified that Yucaipa typicallygenerated fees along the lines produced by the Food4Less merger, but thenet value was far less-$2.6 million. (3/24 RT 192:21-194:12; 3/28 RT247:15-249:23 [explaining how Yucaipa Companies' income was offset byexpenses].)
84
that "depends on the specific facts and circumstances presented in
a given case," including "the relative sophistication and
experience" of the parties; their ability to independently evaluate
the relevant information "and exercise an independent judgment
thereon"; the nature of the transaction; and "the actual financial
situation and needs of the" parties].) Numerous authorities are in
accord. 54
On appeal, "[t]he issue is whether there is substantial evidence to
support the trial court's conclusion that the [prevailing party] did not breach
[his or her] fiduciary duties." (Jones v. Wagner (2001) 90 Cal.App.4th 466,
471-472 [action between business partners]; Marriage ofFriedman , supra,
100 Cal.App.4th at p. 72 [appellate court "bound by (trial court's)factual
finding" of no fiduciary breach, emphasis added]; Marriage ofBonds,
supra, 24 Ca1.4that p. 31 ["a reviewing court should accept such (no undue
influence) factual determinations of the trial court as are supported by
substantial evidence"].)
Here, the trial court heard the evidence and concluded there was no
undue influence and no breach of fiduciary duty. (Exh. A:778-779, 780
781 [~~ 26,32].) Jan does not contest these findings. They are presumed
binding on appeal. (See discussion in § II.A, above.)
54 E.g., Rosenthal v. Great Western Fin. Securities Corp. (1996) 14Ca1.4th 394, 425 (the scope of fiduciary disclosure duties "varies with thefacts of the relationship," citing Duffy); Assilzadeh v. California FederalBank (2000) 82 Cal.App.4th 399,415 ("whether a fiduciary duty has beenbreached, and whether a statement constitutes constructive or actual fraud,depends on the facts and circumstances of each case"); Petersen v.Securities Settlement Corp. (1991) 226 Ca1.App.3d 1445, 1453-1457(stockbrokers' duty to disclose risks of investments varies depending onfinancial status/needs/degree of dependence of customer).
85
Jan contends that Vai v. Bank ofAmerica (1961) 56 Ca1.2d 329
suggests otherwise. (AOB 31-32, 58, 65, 69.) This is not true. There is not
a word in Vai that states, suggests or hints that an appellate court must
accept as true factual assertions that it rejects. In fact, Vai defers to the trial
court's factual findings, but concludes the trial court drew the wrong legal
conclusion from the facts it found. (56 Ca1.2dat p. 342 ["The facts as
found by the trial court show the existence of a fiduciary relationship and
constructive fraud as a matter oflaw"].)
In Vai, the trial court found that the husband told his wife and her
lawyer that he was too ill to respond to discovery; that he promised to
provide the wife with full and complete information about the community
property; and that he promised he would negotiate a fair and equitable
property settlement agreement. (Id. at p. 334.) Relying on these
representations, the wife and her lawyer stopped their own investigation.
(Ibid.) The Supreme Court concluded that, based on the facts the trial court
had actually found, the trial court erred in holding that no fiduciary
relationship existed between the husband and wife. (Id. at p. 342.) It
concluded that the trial court's findings established the existence of a
fiduciary relationship as a matter of law. (Ibid.)
Vai is far afield from the facts of this case. Unlike the situation in
Vai, the trial court here correctly determined that there was a fiduciary
relationship, but that there was no evidence ofbreach or any other abuse of
thefiduciary relationship. (Exh. A:778-779, 780-781 [,-r,-r 26,32].) It
concluded Ron made good-faith, "true and full disclosure of community
assets" and that he exerted no undue pressure. (Ibid.) Additionally, it
86
found that Jan "knowingly chose to deal at arm's length and to rely on her
own investigation of community assets"-as Vai recognizes spouses are
perfectly free to do." (Compare Vai, supra, 56 Ca1.2d at p. 336 with Exh.
A:781-782 [~~ 32, 36-38].)56
Relying heavily on a totally inapplicable case (Vai), Jan ignores a
case that matters (Marriage ofFriedman, supra, 100 Cal.AppAth 65), even
though it was a key case relied on in Ron's trial brief (see RA 71-73, 78-
79). Friedman addresses the same issue presented here. There, the wife (a
lawyer) and the husband (who was engaged in the forensic consulting
business) entered into a postmarital agreement, prepared by the husband's
attorney, that provided each party's future income, property, and debts
55 Unlike the husband in Vai, Ron never told Jan or her lawyers torely on him and Ron declined to warrant the completeness and accuracy ofthe Schedules. (AA VI:1042.) And Jan acknowledged she was not relyingon any representation by him. (AA V:800 [~~ 8, 9].) Ron in no wayimpeded Jan's investigation (e.g., AA V:859); and Jan's team conducted itsown extensive independent investigation (e.g., AA V:986).
56 The fraud cases on which Jan relies are likewise inapposite.(AOB 57-69, citing, inter alia, Marriage ofBrewer & Federici (2001) 93Cal.AppAth 1334, and Marriage ofVarner (1997) 55 Cal.AppAth 128.) Inboth cases, unlike the situation here, the complaining spouse was actually oreffectively unrepresented by counsel. (Varner, 55 Cal.AppAth at p. 144;Brewer, 93 Cal.AppAth at p. 1337.) And in both cases, unlike here, thedefendant spouse made materially misleading statements or outrightmisrepresentations about assets and values on which the complainingspouses actually relied. (Varner, 55 Cal.AppAth at pp. 134, 143; Brewer,93 Cal.AppAth at pp. 1346-1347.) In Varner, unlike here, the husbandprevented the wife from obtaining material financial information. (Varner,55 Cal.AppAth at p. 143.) Here, Jan was fully represented by a team oflawyers, Ron made no misrepresentation, and Jan expressly did not rely onRon's Schedule of assets and estimated values. Finally, in Persson v. SmartInventions, Inc. (2005) 125 Cal.AppAth 1141, 1164-1165, this Courtaffirmed a fraud judgment on substantial evidence that the defendant"specifically undertook to produce all relevant information" then omittedmaterial information. Here the trial court, on ample evidence, foundotherwise.
87
would be his or her separate property. (100 Ca1.AppAth at p. 68.) The wife
wanted to protect her assets from her husband's potential creditors. (Id. at
p.73.) At the time they signed the agreement, "the parties had reasonable
expectations that they would not share in the fruits of each other's business
achievements." (Id. at p. 67.) After entering the agreement, the husband's
business "flourished beyond his and his wife's dreams." (Id. at p. 69.)
When the marriage fell apart, the wife, seeking to obtain the benefits of her
husband's post-agreement success, sought to have the agreement rescinded.
(Ibid.)
Both the trial court and the Court of Appeal saw through the wife's
stratagem. In words directly applicable to our case, Friedman recognized:
"Subsequent events, whether unforeseen or fortuitous, and whether they
favor one side or the other, should not dictate how we decide the legal issue
here presented." (Id. at p. 73. )57 Just as in Friedman, "Judicial erasure of a
competent adult's signature on an agreement does not serve the purpose of
the law of contracts, i.e., to protect the reasonable expectations of the
parties." (Id. at p. 67.)
This is exactly the case here. Jan willingly and knowingly entered
the Agreement in order to preserve her financial status quo, unwilling to
endure the risks that Ron wanted to take. Ron took the risks and
57 See also Marriage ofConnolly, supra, 23 Ca1.3dat p. 604 ("Thefact that later events included a successful public offering which resulted ina financial bonanza must not divert us from our conclusion that at the timethe trial court, counsel, and the parties made and accepted the propertydivision before us its essential terms were fair and reasonable"); MarriageofHeggie, supra, 99 Ca1.AppAth at p. 35 (no fraud where wife bargainedfor essentially cash buyout, making subsequent increase in value ofhusband's stock shares irrelevant).
88
enormously increased his wealth. As in Friedman, Jan-not having agreed
to take the risks-should not be allowed to share in Ron's successes.
III. NO OTHER BASIS EXISTS FOR REVERSING THE ORDER
UPHOLDING THE AGREEMENT'S VALIDITY AND
ENFORCEABILITY.
Jan argues the Agreement should not be enforced for a variety of
reasons. (AOB 38-56,69-83.) None is tenable.
A. Contrary To Jan's Assertions, Spousal Agreements,
Particularly Those Facilitating Reconciliation, Are
Favored Even IfThe Property Is Not Divided Perfectly
Equally.
Jan contends that competent, fully informed, and freely acting
spouses who are separately represented by counsel should not be allowed to
enter into enforceable agreements if a court, in retrospect, might view the
property allocation as unequal. (See AOB 39 [arguing that to be
enforceable, an agreement between spouses must be "fair, just and
equitable. In marital cases, this means the division of the community must
be equal"].) That is not the law.
As long as spouses "agree upon the property division, no law
requires them to divide the property equally, and the court does not
scrutinize the [agreement] to ensure that it sets out an equal division."
(Mejia v. Reed (2003) 31 Cal.4th 657, 666; see also Marriage ofCream
(1993) 13 Cal.AppAth 81, 87 [spouses "are free to divide their community
89
estate in any fashion they wish and need not divide it equally"]; Marriage of
Brewer & Federici, supra, 93 Cal.AppAth at p. 1349 ["we do not mean to
suggest that (the spouses) lacked the ability to decide upon an unequal
distribution of assets"].)58
In this case, Jan and Ron decided to attempt reconciliation and, as
part of that effort, to resolve their differing economic interests and goals.
The Agreement was entered to achieve such resolution. (AA V:799, 806
[~~ C, 2.14].) The Agreement had the desired effect-it paved the road for
an actual multi-year reconciliation. It is exactly the type of agreement
favored by the law. "Public policy seeks to foster and protect marriage, to
encourage parties to live together, and to prevent separation." (Hill v. Hill
(1943) 23 Cal.2d82, 93.) Postnuptial agreements advance these policies.
(Matassa v. Matassa (1948) 87 Cal.App.2d 206,214 [the law favors post-
nuptial property agreements]; accord Marriage ofFriedman, supra, 100
Cal.AppAth at p. 72.) This is especially true if the agreement aids in
58 Andrew v. Andrew (1942) 51 Cal.App.2d 451 (AOB 39) andMarriage ofTammen (1976) 63 Cal.App.3d 927 (AOB 45) do not suggestto the contrary. In Andrew, the husband tricked the wife into an unequaldivision. There, unlike here, the wife was unrepresented by counsel and thehusband misrepresented that the agreement, which the wife never read,divided all property "half and half." (51 Cal.App.2d at pp. 454-455.) Here,there was no trickery and Jan was represented by counsel and a team ofexperts who performed their own investigation as to the couple's assets andknew that Ron claimed substantial assets as separate property. Unlike thewife in Andrew, Jan actually believed the division was "not equal."(AA VI:1203.)
In Tammen, the court purported to divide marital assets evenly, as itwas required to do absent an agreement. (Fam. Code, § 2550.) Here, therewas an agreement that provided for division as agreed by the parties.
90
reconciliation. (Schwab v. Schwab (1959) 168 Ca1.App.2d 20,24 ["An
agreement promoting reconciliation is favored by the law ...."].)
A postnuptial agreement not tainted by fraud, compulsion or abuse of
the parties' confidential relationship is "valid and binding." (Matassa v.
Matassa, supra, 87 Ca1.App.2d at p. 214.) That's exactly what the trial
court found here.
B. Contrary To Jan's Assertions, The Agreement Is Not
Subject To Invalidation For Lack Of Lawful
Consideration.
Jan argues the Agreement is not supported by lawful consideration.
(AOB 44-53.) She is wrong-for multiple separate reasons.
1. The Agreement needn't be supported by any
consideration.
Marital agreements transmuting property from separate to
community (or vice versa)-such as Jan and Ron accomplished under the
Agreement-need not be supported by any consideration. Family Code
section 850 expressly so declares: "[M]arried persons may by agreement or
transfer, with or without consideration ... : (a) Transmute community
property to separate property of either spouse." (Fam. Code, § 850,
emphasis added.)"
59 See Marriage ofBroderick (1989) 209 Ca1.App.3d 489, 500 (likemarital transfers, real property deeds are valid without consideration; wifecould not claim inadequate consideration where she accepted $3,000 fromher husband in return for a quitclaim deed relinquishing her community
(continued...)
91
2. There is no restriction on the type of consideration
that can support a postmarital agreement.
Jan contends that an unequal property split can only be based on
economic considerations; she claims "agreements to reconcile, or to attempt
to reconcile, are not legitimate consideration for economic concessions."
(AOB 47, 52, 53.) Again, Jan is mistaken.
First, Jan's argument goes nowhere because, even if she were correct
(she isn't), she ignores the trial court's findings that she did enter the
Agreement for economic reasons. Jan bargained for and obtained millions
of dollars that became her separate property; she obtained a home that
became her separate property; and she obtained protection from economic
risk and fluctuating marital asset values. (Exh. A:777, 782, 784-785, 787
[~~ 18,40, 51, 56J; see AA V:803-804, 811 [~~ 2.2.2,2.4, 8.4J.)60 These are
real economic benefits which Jan was entitled to keep regardless whether
Ron's investments succeeded or flopped.
These economic benefits suffice as consideration to support the
entire Agreement. (Civ. Code, § 1605 [legal consideration consists of
"[a}ny benefit conferred, or agreed to be conferred, upon the promisor, by
any other person, to which the promisor is not lawfully entitled," emphasis
added]; see also Rice v. Brown (1953) 120 Cal.App.2d 578, 582 ["The law
59 ( ...continued)property interest in a family home, an interest that she alleged was worth$13,000).
60 The monetary payments belonged to Jan even if Ron died, inwhich case Jan would also be entitled to receive 50 percent of all the assets.(AA V:809 [~5.2].) And, if Ron's risky investments had resulted in largelosses, Jan could have potentially received well over half of all the assetsunder the Agreement in the event of divorce.
92
will not weigh the quantum of consideration," and "[t]he slightest
consideration is sufficient to support the most onerous obligation," internal
quotation marks omitted]; Chrisman v. Southern Cal. Edison Co. (1927) 83
Cal.App. 249, 254 [trifling consideration will sustain contract if promisor
not otherwise entitled to it].)
Here the trial court found that the Agreement was, "[i]n light of each
party's goals and desires," a "fair and equitable" agreement, "effectively
compromising a multitude of issues between the parties." (Exh. A:787
[,-r 60].) That is all the law conceivably required: The law "does not require
an exact relation between value and price but only what is just and fair
under all of the circumstances." (Rader v. Thrasher (1962) 57 Ca1.2d244,
252.)
Second, although there is true economic consideration here, Jan's
assertion that only economic consideration can support an agreement
allocating marital property is wrong. "[W]here dissension exists between a
husband and wife, and they have become estranged on that account, the
execution of a conveyance ofproperty from the husband to the wife, which
is free from fraud or undue influence, made as an inducement for
reconciliation, harmony, and the renewal of marital relations, constitutes a
sufficient consideration for the execution of the instrument." (Dale v. Dale
(1927) 87 Cal.App. 359, 364.) Numerous cases agree."
61 E.g., Schwab v. Schwab, supra, 168 Cal.App.2d at p. 24 (maritalproperty transmutation made as inducement for reconciliation supported byadequate consideration); Cummins v. Cummins (1935) 7 Cal.App.2d 294,301-302 (husband's conveyance ofproperty to wife in consideration of"love and affection" constituted valid consideration for reconciliationagreement entered into during divorce proceedings); Tillaux v. Tillaux
(continued...)
93
Jan's citations are not to the contrary. (AOB 52, citing Fishbaugh v.
Fishbaugh (1940) 15 Cal.2d 445; Lane v. Lane (1926) 78 Cal.App. 326.)
Those cases do not talk about the adequacy of consideration, but rather
address lies by a spouse concerning his or her intent to reconcile. Here, Jan
received exactly what she bargained to receive in a context where, the trial
court found, Ron genuinely wanted to reconcile. (Exh. A:777 [~ 17]; see
3/28 RT 176:22-177:6; 6/29 RT 109:19-110:2.)
According to Jan, O'Hara v. Wattson (1916) 172 Cal. 525, holds that
"pretium affectionis" is never valid consideration. (AOB 53.) 0 'Hara says
no such thing. It merely affirms a trial court'sfactualfinding on "a question
upon which the decision of the trial court must, in large measure, control."
(172 Cal. at p. 527.) In our case, too, this Court should defer to the trial
court's fact findings that the consideration was sufficient.
Rather than supporting Jan, 0 'Hara actually rejects the very
argument that Jan now makes:
"It will not do to say that the consideration must be held
inadequate unless the value of the property at the time of the
contract ... exactly or even substantially equals the price
fixed by the contract. . . . Undoubtedly the relations of the
parties, and their love, affection, or regard for each other, as
well as the object to be attained by the contract, may be given
some effect." (ld. at p. 528.)
61 ( ...continued)(1897) 115 Cal. 663,669 (deed conveyed out of "love and affection"supported by "full and meritorious consideration").
94
3. There is no merit to any of Jan's other claims that
the consideration was inadequate.
Jan raises an assortment of other claims concerning the supposed
inadequacy of consideration. None has merit.
a. Jan argues that consideration failed because she ended up
with money and property "to which she was legally entitled, and which Ron
was already legally bound to give her or to acknowledge as hers."
(AGB 44-45.) Not so. Jan had no legal entitlement to a continuing
marriage and $1 million per year payments to become her separate property
upon receipt or to $30+ million and her own home regardless of future risk.
b. Jan contends the consideration was inadequate because she
could not have done worse had she divorced Ron. (AGB 40-44.) The trial
court rejected this speculation. (Exh. A:787 [~ 56]; see also Exh. A:781
[~ 33] [Ron compromised on the characterization of assets under his theory
of the date of separation].) And, Jan's speculation ignores reality: She
didn't want to divorce; she wanted to reconcile. Without the Agreement,
Jan could not have had both the economic security she wanted and a
continuing marriage to Ron, who thrived on financial risk. (3/24 RT
110:24-111 :23; 6/18 RT 175:3-23; 6/29 RT 41:15-24.)
c. Jan asserts that some of the Agreement's terms were "grossly
advantageous to Ron, and disadvantageous to" her. (AGB 40-42.) This is
untrue. It ignores that Jan wanted the Agreement at the time. It also
95
ignores substantial evidence to the contrary.f In any event, as
demonstrated above, the quantum of consideration is irrelevant.
d. Jan argues that the consideration was inadequate because it
was not separately collateralized. (AOB 45.) Under the law, consideration
can be valid without collateralization. As demonstrated above, any
consideration, including an unsecured promise to pay, suffices as legal
consideration. (Civ. Code, § 1605 ["(a)ny benefit ... agreed to be
conferred" qualifies as consideration, emphasis added].) Adding collateral
62 Jan's characterizations of one-sidedness are inaccurate. She reliessolely on evidence favorable to her, disregarding the substantial evidencerule and the trial court's right to credit Ron's evidence, rather than hers.Here are some examples:
• Jan claims that certain debts that the Agreement allocated to thecommunity were incurred to purchase Ron's separate assets and thereforeshould not have been a community responsibility. (AOB 41.) Ron testifiedthat the funds generated by those debts were not used to purchase separateproperty. (6/16 RT 56:21-23, 125:24-127:1.)
• Jan claims that Ron undervalued the Smith's and Food4Lessinterests. (AOB 40.) But this is at odds with Ron's directly contrarytestimony. (3/24 RT 146:10-14,156:8-157:9; 3/28 RT 256:7-257:2.) Janclaims the value ofFood4Less increased by $60 million between June 6 andNovember 22. (AOB 41.) In fact, there was no change. (3/24 RT 194:1921,197:14-20; 7/2 RT 94:10-13.)
• Jan contends that her interest should not have been based on a taxeffected value. (AOB 41.) But, this is contradicted by her own lawyer'sdeposition testimony admitting that this was a reasonable approach. (6/30RT 45:2-46:8.)
• Jan's claim that she received only a 5% interest rate on her$30+ million (AOB 41) is inaccurate. Her true interest was8.33%-because she received an additional $1 million a year, representinga further 3.33% return. Whether 8.33% or 5%, the rate was an objectivelyreasonable one: As of November 21, 1997 (the date Ron signed theAgreement), a five-year Treasury Note was yielding taxable interest at5.75% (http://wwws.publicdebttreas.gov/AI/OFAuctions) and an unsecuredfederal court judgment entered on that date would have borne taxableinterest at 5.43% per annum. (See 28 U.S.c. § 1961;http://www.federalreserve.gov/re1eases/ h15/19971124.)
96
to a promise goes to the amount, not the adequacy, of the consideration."
In any event, Jan was not concerned about collateral. The issue was
discussed during negotiations and in the end, as the trial court found, Jan
"trusted [Ron's] business acumen to the extent that she was not afraid that
[Ron] would be unable to fulfill his part of the bargain." (Exh. A:786
[~55]; see 6/29 RT 150:14-21; 6/30 RT 42:16-43:7; AA V:990 [~ 1];
AA VI: 1041.)
e. Jan argues that the Agreement lacks consideration because it
is premised on an assertedly losing legal claim-that the couple was
separated before Jan filed her petition for divorce in June 1997. (AOB 46
47.) Jan is wrong. Compromise of a plausible or honestly held legal
position is valid consideration. (Louisville Title Ins. Co. v. Surety Title &
Guar. Co. (1976) 60 Cal.App.3d 781, 792 [compromise of dispute asserted
in good faith is valid consideration, even if claim ultimately proves
unfounded]; Rest.2d Contracts, § 74(1) [forbearance or surrender of even an
invalid claim or defense is proper consideration where either "the claim or
defense is in fact doubtful because of uncertainty as to the facts or the law,
or ... the forbearing or surrendering party believes that the claim or defense
may be fairly determined to be valid," emphasis added].)
Here, Ron's position was both honestly held and supported: For
many years before 1997, the parties had separate residences; did not have
keys to each other's houses; and saw each other only infrequently. (3/24
RT 66:8-71:13, 73:12-21; 6/29 RT 61:25-62:10; see also AOB 4 [Jan
63 Jan ignores the fact that if asset values had started to fall, Jan hadthe absolute right to demand payment of her $30+ million at any time.(AA V:803 [~2.2.2].)
97
admits Ron "spent much of his time" at Green Acres]; AA V:798 [,-r B:
recital in the Agreement that the parties had been "living separate and apart
for approximately five (5) years"].) Regardless how a trial court would
ultimately have ruled on the separation issue, it is undeniable the date of
separation was in dispute and was compromised by the Agreement.
(AA V:798-799 [,-r,-r B, E].) The compromise "obviated the need to litigate
that very issue and that issue cannot now be reopened." (A.J. Industries,
Inc. v. Ver Hafen (1977) 75 Cal.App.3d 751,760-761 [no rescission for
lack of consideration where agreement was entered into to avoid litigating
allegedly invalid claim; release of a claim is good consideration].)
But even if compromise of the separation claim could somehow not
qualify as valid consideration, it is undisputed that other valid consideration
(e.g., the fixed $1 million yearly payments, the fixed promise to pay
$30+ million, the obligation to purchase Jan a horne) independently
supported the Agreement.
c. The Dispute Over Whether Ron Tendered Adequate
Payment After Jan Repudiated The Agreement Is Not A
Ground For Rescission.
Jan asserts a right to rescind because Ron did not continue to
perform the Agreement after she claimed the Agreement was void and
sought to rescind. (AOB 76-83.) Jan's assertion is untenable.
The trial court found that Jan, by claiming the Agreement was void
and seeking to set it aside, intentionally repudiated the Agreement, thus
98
relieving Ron of any duty of continued performance. (Exh. A:784-785
[~~ 51-53].) Both substantial evidence and the law support the finding.
1. Jan's divorce action and her discovery responses-both under
oath-unequivocally repudiated the Agreement, seeking to have it declared
null and void. (AA 1:6 [Jan's sworn divorce petition states Agreement is
"void and unenforceable"]; AA X:1935-1956 [sworn discovery responses to
same effectj.)" This excused Ron from any obligation to further perform.
"It is well settled that an unequivocal repudiation of the contract by one
party prior to material breach of the contract by the other party excuses the
other party from tendering performance of his concurrently conditional
obligations." (Kassler v. Palm Springs Developments, Ltd. (1980) 101
Cal.App.3d 88, 102-103; see Civ. Code, §§ 1440, 1511, 1515; see also
Beverage v. Canton Placer Mining Co. (1955) 43 Ca1.2d 769, 777 ["where
a vendor repudiates a contract and indicates that he is not bound thereby, a
tender is unnecessary"]. )65
2. Jan contends that her divorce petition and sworn discovery
responses were just a "mere assertion" of unenforceability, not a
repudiation. (AOB 80.) However, the very case on which she relies,
Atkinson v. District Bond Co. (1935) 5 Cal.App.2d 738 (see AOB 80),
refutes her position. Atkinson holds that "a distinct, unequivocal and
64 Jan served discovery responses before any payment was due.(AA X:1935-1956 [discovery responses served by 9/17]; see also AA V:803[~2.2.2(a): first payment due 90 days after service of dissolution petition,i.e., 9/23]; AA Vl:1l71-1l72 [Ron's 9/23 tender letter].)
65 Of course, Ron stands ready to perform once the Agreement isvalidated by the Court. The trial court had no doubt about that. (7/6 RT70:8-16.)
99
absolute refusal" to be bound by an agreement is a repudiation.
(5 Cal.App.2d at p. 744.) That's exactly what occurred here.
In any event, whether Jan repudiated was a question of fact for the
trial court. (Singh v. Burkhart (1963) 218 Cal.App.2d 285,293.) The trial
court held that Jan's conduct was a repudiation. (Exh. A:785 [,-r,-r 52, 53].)
3. Jan argues that Ron somehow "nullified" her unequivocal
repudiation by attempting to tender payment, (AOB 81.) Jan cites no
authority for this strange proposition, nor is there any. An offer by one side
to continue to perform does not negate the other side's repudiation
especially where, as here, Jan reconfirmed her repudiation by refusing the
tendered payment. (AA VI: 1173.)66
4. Jan admits that she "would have to refuse to accept any
payments under the [Agreement] in order to avoid any claim by Ron that
she had ratified the Agreement and waived her right to avoid it."
(AOB 43.)67 The law did not require Ron to perform an idle act. (Civ.
66 See Rest.2d Contracts, § 257 ("The injured party does not changethe effect of a repudiation by urging the repudiator ... to retract hisrepudiation"); Guerrieri v. Severini (1958) 51 Ca1.2d 12, 19-20("Manifestation by the injured party of a purpose to allow or to requireperformance by the promisor in spite of repudiation by him, does not nullifyits effect as a breach, or prevent it from excusing performance ofconditionsandfrom discharging the duty to render a return performance," emphasisadded, internal quotation marks omitted).
67 A party seeking to rescind who accepts later tendered performancereaffirms the agreement and waives the rescission claim. (Saret-Cook v.Gilbert, Kelly, Crowley & Jennett, supra, 74 Cal.AppAth at pp. 1225-1227;Gedstad v. Ellichman, supra, 124 Cal.App.2d at p. 835.)
100
Code, § 3532.) A party cannot both remain poised to reject any tender
made and claim a defective tender. 68
For these reasons, Jan cannot seek rescission based on anything that
happened after she filed the present action.
D. Contrary To Jan's Assertions, Ron Is Not Suing For
Specific Performance; He Simply Asks, In Response To
Jan's Claims, That The Agreement Be Honored.
According to Jan, her attempt to rescind the Agreement somehow
translates into a demand by Ron for its specific performance. (AOB 53-57,
81-82.) This is wrong, and it makes no sense.
It is Jan who sought rescission, not Ron. All Ron wants is that Jan
honor the agreement she executed; he is not seeking to compel her to do
anything.
At bottom, Jan fundamentally misunderstands the limited scope of
specific performance. It is a remedy invoked to make someone else do
something he or she promised to do when money damages will not
suffice-such as transferring or assigning a unique home pursuant to a sales
contract. (E.g., Civ. Code, § 3387 [authorizing specific performance as
remedy for breach of an agreement to transfer real property].) Jan's
68 "[T]echnical defects in the matter of tender become unimportant"where a party admits that had "an unconditional offer on the part of (theopposing party) to perform their obligations under the contract ... beenmade, ... such offer ... would have been refused." (Bora v. Ruzich (1943)58 Ca1.App.2d 535, 541.)
101
unsupported proclamations can't unilaterally turn Ron's defense to her suit
into a specific performance action he never brought. 69
Even under a specific performance standard, the adequacy of
consideration or fairness of the deal is a fact question for the trial court
subject only to substantial evidence review. (Paratore v. Perry (1966) 239
Cal.App.2d 384,387.) The trial court found the Agreement "fair and
equitable" and one a "rational person could comfortably reach." (Exh.
A:787-788 [,-r,-r 56,60].) Jan has not attacked the sufficiency of the evidence
to support that finding.
E. Jan's Discovery And Evidentiary Contentions Are
Meritless.
Jan argues that certain discovery and evidentiary rulings hampered
her ability to prove her case. (AOB 35-38.) The assertions are untenable.
1. Jan's arguments are waived.
A trial court's discovery and evidentiary orders are presumed correct,
unless proven otherwise on appeal; an appellant must affirmatively
demonstrate both error-an abuse of discretion-and prejudice. (E.g.,
Obregon v. Superior Court (1998) 67 Cal.AppAth 424,432 [discovery
rulings]; Stockinger v. Feather River Community College (2003) 111
Cal.AppAth 1014, 1022 [evidentiary rulings].) Jan does not attempt to
69 Were the law otherwise, every time a defendant pleadedsettlement or release the defendant would have to prove a specificperformance case. But that is not the law. (See Booth v. Bond (1942) 56Cal.App.2d 153, 157 [party pleading release need only show someconsideration]. )
102
demonstrate either, thereby waiving any right to complain. (See § ILA,
above.)
2. The discovery rulings were within the trial court's
broad discretion.
Even had Jan not waived her right to challenge them, the trial court's
discovery rulings were well within its discretion.
Jan initially sought broad-gauged discovery into everything Ron used
to create the Schedules, i.e., to go behind the Schedules, on the theory that
the Agreement was presumptively invalid on its face. (1/21 RT 11:24
14:18; 2/29 RT 78:17-79:10; AA II:322-326, 406-409.) As we
demonstrated above (see discussion in § II.B.1.b, above), the Agreement
was facially valid, unless and until Jan proved that Ron gained an unfair
advantage, something Jan never succeeded in doing.
Under the circumstances of this case, the trial court deemed it
inappropriate to allow unfettered discovery in the first instance.
Undisputably, the parties entered the Agreement while each was fully
represented by independent counsel; moreover, the Agreement contained
numerous recitals affirming that it was exactly what the parties wanted.
(E.g., 1/21 RT 56:20-58:12, 75:8-76:5.) The Agreement acknowledges that
both sides had ample time and opportunity to do whatever investigations
they desired. (AA V:800.) The parties specifically intended the Agreement
to "fully resolve all possible financial issues between them so that they will
each of them be spared the financial and emotional costs of litigation."
(AA V:798; see 1/21 RT 36:10-16, 55:6-13, 75:8-76:5.) The trial court
103
recognized that if the Agreement were ultimately upheld, allowing the
unfettered discovery Jan demanded would have defeated one of its central
purposes. (1/21 RT 74:10-76:5.) Additionally, Jan never claimed during
the discovery proceedings that Ron misrepresented or concealed any
particular information such as would justify her broad discovery demand.
Thus, the court sensibly decided to approach the case in steps, so as
to focus the initial inquiry on the seminal issue of the circumstances
surrounding the negotiation and execution of the Agreement, including the
issue concerning Jan's reliance, or absence thereof, on Ron. (1/21 RT 55:6
58:12, 74:22-80:10, 86:22-87:5; 2/29 RT 82:13-91:13.) Accordingly, the
trial court denied Jan's broad discovery requests without prejudice to
renewal at a later time. (E.g., 1/21 RT 86:25-87:5; 2/29 RT 82:13-91 :13.)
Nowhere does Jan challenge the trial court's exercise of discretion to
determine the order of the issues to be tried. Nor does she claim that the
trial court denied her any discovery as to the issues to be tried first. (See
Cal. Rules of Court, rule 5.175 [authorizing bifurcation of family law trial];
Marriage ofHixson (2003) 111 Cal.AppAth 1116, 1121-1122 [trial court
did not abuse discretion in limiting discovery directed at assets listed in
prior negotiated stipulated judgment without preliminary showing to
impeach the judgment's validity].) The discovery provided included
extensive depositions of Ron and other witnesses, as well as the production
of the couple's tax returns and other documents. (2/29 RT 4:12-23,40:19-
104
41:6,57:2-14,74:23-76:16,96:17-99:20,106:9-117:10; 6/16 RT 35:12-19,
38:24-40:5·ro
3. The discovery rulings could not have been
prejudicial given the trial court's finding that Jan
did not rely on Ron in entering the Agreement.
Jan's discovery complaint is that she had no sufficient opportunity to
discover whether Ron accurately stated and valued the marital assets. In the
end, however, Jan's contention is beside the point, as the trial court found
that she didn't rely on Ron. It found that she relied on her own judgment
and her own team's extensive, independent investigations of the couple's
assets, and that Ron never pressured her to sign the Agreement. (Exh.
A:776, 778, 780-783 [,-r,-r 12,21,31,35, 38,43].)
4. Jan has demonstrated neither error nor prejudice
in any evidentiary ruling.
Jan also complains that the trial court refused to allow her to show
that she and Ron did not separate until June 1997. (AOB 35-38.) The trial
70 Jan suggests that in portions of discovery not part of the record onappeal, Ron's counsel may have objected to discovery which, according toJan, sought relevant information. (AOB 36.) The question on appeal,however, is not what discovery Ron's counsel objected to, but what the trialcourt ruled. In any event, it is improper for Jan to rely on matters outsidethe appellate record. (Sacks v. FSR Brokerage, Inc., supra, 7 Cal.AppAth atpp. 962-963 [lodged depositions not read by court are outside appellaterecord]; 6/30 RT 119:13-120:3 [Jan's counsel requests depositions belodged but "not offer[ed] ... for the judge to read the testimony"]; see alsothis Court's 4/22/05 Order [denying Ron's motion to strike depositiontranscripts, but noting Court "will not consider any items that were not partof the record before the trial court during the proceedings that are thesubject of the appeal"].)
105
court excluded the evidence as irrelevant to the issues then being tried.
(6/16 RT 140:13-159:2; 6/17 RT 128:19-132:22.) Jan does not challenge
this ruling as erroneous nor does she show prejudice. Thus, the ruling is
presumptively correct and there is nothing for this Court to decide.
In fact, however, there was no reason to litigate the date of
separation, as the issue was resolved by the Agreement. (AA V:798-799
[,-r,-r B, El.)" Inquiry into a resolved issue made no sense; it had no
relevance to the issue being tried-the validity and enforceability of the
Agreement. (E.g., AJ Industries, Inc. v. Ver Halen, supra, 75 Cal.App.3d
at pp. 756-760 [no abuse of discretion in refusing to allow proof of
director's malfeasance when issue had been previously negotiated and
settled].)
F. Contrary to Jan's Contention, The Statutes Mandating
Formal Asset Disclosures In A Marital Dissolution
Proceeding Do Not And Cannot Undermine The Validity
Of The Agreement.
Family Code sections 2100, et seq., require the exchange of formal,
sworn, written asset disclosures in marital dissolution proceedings before a
property-division judgment may be entered." Jan contends that the
71 Before Jan signed the Agreement, she undeniably knew all thefacts and arguments regarding the couple's separation, and her lawyersundoubtedly understood and advised her of the significance of theseparation date on the characterization of the marital property as separate orcommunity. (6/16 RT 140:13-157:6; AA V:824, 973-975, 977.)
72 These statutes have been amended since 1997 when theAgreement was executed. In this Section F, all references to the Family
(continued...)
106
Agreement-under which she accepted millions of dollars without
complaint for over five years-must be voided because neither she nor Ron
made such formal disclosures before entering the Agreement. (AOB 69-
76.)
Jan is wrong for two independently dispositive reasons: (1) the trial
court found, as expressly permitted by statute, that "good cause" excused
compliance with the disclosure statutes and Jan has not shown or suggested
the trial court erred or abused its discretion in so finding, and (2) the
statutes were never intended to apply to agreements, such as the one here,
made in contemplation of reconciling. (Exh. A:780 [~31].)
Each of these findings separately and independently compels
rejection of Jan's assertions. The Agreement cannot be set aside unless the
trial court was wrong on both points. Jan raises no issue as to the former
reason and misconceives the statutory scheme in attacking the latter reason.
72 ( •••continued)Code are to the 1997provisions, unless otherwise noted. (Evangelatos v.Superior Court (1988) 44 Ca1.3d 1188, 1193-1194 [absent clear legislativedirective, statutory amendments are presumptively not retroactive]; seeStats. 2001, ch. 703, § 8 [certain amendments to these sections expresslyonly apply prospectively].)
107
1. Exactly as the statutes expressly permit, the trial
court found good cause for excusing compliance
with the formal disclosure requirements; Jan's
brief neither mentions nor attacks this finding and,
thus, the finding is binding on appeal.
The statutes that require formal asset disclosures in marital
dissolution proceedings expressly allow the trial court to excuse compliance
ifit determines there is "good cause" for doing so. (Fam. Code, §§ 2105,
subd. (a) [good cause excuses final disclosure], 2106 [property-division
judgment can be entered if there is "good cause" for not complying with
disclosure requirements]; Elden v. Superior Court (1997) 53 Cal.AppAth
1497, 1512 [remanding for determination whether good cause exists for
excusing failure to make disclosures].)
Here, the trial court expressly found "good cause [to] exist ... to
enforce the Agreement, as authorized under Family Code § 2105, even
without strict compliance with the declaration of disclosure
requirements ...." (Exh. A:780 [~31].) Jan neither mentions nor attacks
this finding. It is binding. (See §§ I.C, II.A, above.)
But even if Jan had attacked the good cause finding, she could not
have prevailed. "Determinations of good cause are generally matters within
the trial court's discretion, and are reversed only for an abuse of that
discretion." (Laraway v. Sutro & Co. (2002) 96 Cal.AppAth 266,273,
citations omitted.)
An abuse of discretion does not exist unless an appellant
affirmatively demonstrates that, after resolving all evidentiary conflicts in
108
favor of the good cause ruling and considering the circumstances as a
whole, a reasonable judge could not have made the same ruling. (Marriage
ofDuncan (2001) 90 Ca1.AppAth 617,630 [discretionary ruling must be
affirmed "unless no judge could reasonably make the order made," citations
and internal quotation marks omitted]; Marriage ofEben-King & King
(2000) 80 Ca1.AppAth 92, 118 [to be reversed, despite all favorable
inferences, ruling must exceed "the bounds of reason"]; Marriage ofSmith
(1990) 225 Ca1.App.3d 469,480 [where court has discretion, no reversal
unless "considering all the relevant circumstances, the court has exceeded
the bounds of reason or it can fairly be said that no judge would reasonably
make the same order under the same circumstances," citations and internal
quotation marks omitted].)
Jan neither contends nor demonstrates that the good cause ruling was
unreasonable, nor could she. The good cause determination here was
eminently rational, supported by substantial reasons. In its findings, the
trial court found good cause "because, among other reasons, [(1)] the
parties were represented by sophisticated and competent counsel and expert
forensic accountants, [(2)] there was no impediment to investigation by
either side, and [(3)] Petitioner accepted the benefits of the Agreement for
years before challenging it." (Exh. A:780 [~31].) The good cause finding
is further supported by substantial evidence showing that Jan was fully
informed of the pertinent facts at the time she entered the Agreement; that
Ron made comprehensive, good-faith affirmative disclosures of assets and
valuations; that he provided detailed financial footnotes when Jan's team
requested them; that he made available to Jan and her team all of his books
109
and records; that Jan undertook her own extensive independent
investigation into Ron's assets; that Jan and her team had actual knowledge
of the mergers that she now claims were not disclosed; and that Jan relied
solely on what her own investigation disclosed, not on Ron. (See Statement
of the Case, §§ A-D, above.) Further, if Jan was truly uninformed about
any meaningful fact, she could have called any member of her investigative
team to confirm her lack of knowledge, but she never did. (See § lLC,
above.)
Unquestionably, Judge Lachs' determination that good cause existed
for not requiring compliance with the statutory formal asset disclosure
requirements was authorized by statute, reasonable, and fully supported by
the record. It was entirely proper for Judge Lachs to conclude that the
statutory objective-to assure that the parties to a dissolution proceeding
are fully informed of marital assets and liabilities before final issuance of a
property decree (Fam. Code, § 2100, subd. (a»-was met.
2. Even if the statutory disclosure requirements were
not excused by the finding of good cause, the
statutory scheme was not applicable, as it was
intended to apply only to agreements, unlike the
one here, made in dissolution proceedings with the
purpose of terminating the marriage and dividing
property in those proceedings.
The second independent reason why formal statutory asset
disclosures were not required here is that sections 2100, et seq., as in effect
110
in 1997, were inapplicable. Such statutes, by their terms, applied only to
those spousal agreements entered into during dissolution proceedings with a
view towards obtaining a judgment dissolving the marriage and dividing
property. As the trial court found, that was not the case here. (Exh. A:780
[~31]; 1/21 RT 72:12-74:9.)
Spouses, even prospective spouses, can agree in a variety of contexts
on how property is to be divided, whether or not their marriage is ever
dissolved. For example, they can enter into premarital agreements,
postmarital agreements during the course of a marriage, reconciliation
agreements, or agreements designed to dissolve the marriage (popularly
known as "marital settlement agreements")." Only one of these types of
agreements is governed by sections 2100, et seq., namely, those agreements
entered in contemplation of obtaining a dissolution decree in an active
dissolution proceeding.
73 California law has long differentiated between agreements madeduring a continuing marriage, including those intended, as here, to effect areconciliation, and so-called marital settlement or marital terminationagreements intended to dissolve a marriage or lead to a legal separation.(Plante v. Gray (1945) 68 Cal.App.2d 582, 587 [agreement made tocontinue marriage not mooted by reconciliation as marital settlementagreement would be].) Although no longer statutorily defined, a "marriagesettlement agreement" has long been understood in California as a term ofart referring to an agreement that ends a marriage. (See former Civ. Code,§ 178 [spouses could agree to a "marriage settlement"].) It is wellunderstood (and was understood by the Legislature when it enacted sections2100, et seq.) that marital settlement agreements-that is, comprehensiveagreements reached by spouses who are dissolving a marriage-aresignificantly different from other types of spousal agreements, i.e.,premarital agreements, agreements during a continuing marriage. (SeeHogoboom & King, Family Law, supra, § 9:4, pp. 9-1 to 9-2; §§ 9:3109:446, pp. 9-70 to 9-98.11 [extensively discussing issues specific to maritalsettlement agreements as part of an action to dissolve a marriage].)
111
Sections 2100, et seq., call for a specific form of disclosures, but
only in a specific context-the context of a property division as part of
dissolving a marriage in the course of active dissolution proceedings. By
statutory directive, those sections apply only in dissolution, nullification or
legal-separation proceedings. (Fam. Code, § 2000.)
The disclosure statutes contemplate a two-step process incident to
proceedings seeking marital dissolution: first, the service of a preliminary
declaration of disclosure (Fam. Code, § 2104); and, second, unless waived,
the service of a final declaration of disclosure (Fam. Code, § 2105).74
Final disclosures are required, absent good cause, "before or at the
time the parties enter into an agreement for the resolution ofproperty or
support issues other than pendente lite support, or, in the event the case
goes to trial, no later than 45 days before the first assigned trial date ...."
(Fam. Code, § 2105, emphasis added.)" On its face, therefore, the statute
74 Jan quotes extensively from Family Code section 2102 to suggestthat Ron owed a duty not just to disclose the mergers, but to do so in writingas an "investment opportunity" as described in the statute. (AOB 73-74.)Like the rest of sections 2100, et seq., that section, however, applies only indissolution, nullity and legal-separation proceedings (Fam. Code, § 2000)and only "[f]rom the date of separation to the date of the distribution of thecommunity asset or liability in question" (Fam. Code, § 2102). Thus, likethe rest of sections 2100, et seq., the provision was intended to be operativeonly in legal dissolution proceedings distributing community assets. In anyevent, the mergers were not "investment opportunities." There was noopportunity for anyone, least of all Ron, given insider-trading restrictions,to "invest" in them.
75 Preliminary disclosures require identifying (but not valuing) all ofa spouse's assets and liabilities "regardless of the characterization of theasset or liability as community, quasi-community, or separate." (Fam.Code, § 2104.) Final disclosures require disclosing "[a]ll material facts andinformation regarding the characterization of all assets and liabilities" and"regarding the valuation of all assets that are contended to be community
(continued...)
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contemplates resolution of the property or support "issues" that are pending
in the dissolution proceeding either by agreement or by trial. In short, the
"agreement" referred to in the statute is necessarily an alternative to taking
a pending dissolution case to trial-that is, it is a means of resolving the
case in lieu of proceeding to trial. It is not some agreement that stands
independent of the litigation process, as the Agreement does.
That sections 2100, et seq., apply only to agreements reached in the
specific context of seeking a decree dissolving marriages is reinforced by
the structure of the Family Code itself. Those statutes are found in Family
, Code, Division Six, Part 1. As noted above, that Part applies only to a
"proceeding for dissolution ofmarriage, for nullity of marriage, or for legal
separation of the parties." (Fam. Code, § 2000.)76
A different statutory scheme governs spousal agreements made, as
here, as part of a continuing marriage. That scheme appears in Family
Code, Division Four, "Rights And Obligations During Marriage"-e.g., in
sections 721, 850, 852, 1100, and 1500. No mention is made in that
Division of the sort of formalized disclosure requirements specified for
agreements made in dissolution proceedings with a view towards
75 (. .. continued)property or in which it is contended the community has an interest." (Fam.Code, § 2105.) The Agreement's Schedules coupled with Ron's otherdisclosures did just that.
76 People v. Hull (1991) 1 Cal.4th 266,272 ("it is well establishedthat' chapter and section headings [of an act] may properly be considered indetermining legislative intent' [citation], and are entitled to considerableweight. [Citation]," internal quotation marks omitted; Humphrey v.Appellate Division (2002) 29 Cal.4th 569,573 (a statute's placement in theCode is relevant to construing its meaning).
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terminating the marriage and embodying the agreement as part of a final
judgment.77
The 1997 version of section 2105, in effect at the time of the
Agreement, confirmed that the statutory scheme only applies to agreements
intended to dissolve a marriage and to be incorporated into a dissolution
judgment. It referred to waiver of the final disclosure requirements only in
a "marital settlement agreement or by stipulated judgment or a stipulation
entered into in open court." (Fam. Code, § 2105, subd. (c), emphasis added
(1997).) As discussed above (see note 73), a "marital settlement
agreement" is a term of art applying only to agreements terminating
marriages. If section 2105 was intended to apply generally to all
agreements between spouses, there presumably would have been some
provision for waiver in all agreements, not just those in "marital settlement
agreements."
On its face, the statutory scheme evidences a legislative intent to
apply only to marital dissolution proceedings and, thus, only to spouses who
are engaged in and pursuing a pending court action seeking dissolution of
their marriage when, as part of that process, they are about to: (1) have a
trial to resolve the issues concerning division of their assets or setting their
support rights, or (2) in lieu of such a trial, enter into a marital settlement
agreement intended to resolve the issues that would have been tried, but for
the agreement, as the basis for entering a dissolution judgment in the action.
77 Other statutory provisions govern premarital agreements, FamilyCode sections 1600-1617, again with no mention of formalized disclosurerequirements such as those for dissolution proceedings.
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Outside of this specific context, the statutory scheme has no
application to any other types of property agreements between
spouses-premarital agreements, transmutation agreements, agreements
during a continuing marriage, or reconciliation agreements. As we now
more fully explain, the statutory scheme has no application here.
3. The statutory disclosure requirements have no
application here because the Agreement was
intended to continue, not dissolve, Ron and Jan's
marriage and was independent of any pending
dissolution action.
The Agreement here was not a marital settlement agreement or other
agreement designed to end a marriage. In entering the Agreement, Jan and
Ron weren't seeking (or even contemplating) a judgment ending their
marriage or a judgment dividing their property. Rather, they intended to
reconcile, to attempt to continue their marriage. (AA V:798; 6/18 RT
171:23-173: 12.) On its face, the Agreement's purpose was to facilitate just
such a reconciliation, not to dissolve the marriage. (Exh. A:776-777, 779
780 ['\I~ 16-17,30-31].)
Specifically, Jan and Ron intended the Agreement "to promote
increased understanding, harmony and trust by effectively and finally
resolving all financial issues, disputes and conflicts they might have now
and in the future" and to "increase the probability that they will remain
married to each other ...." (AA 798,806 [Stmt of intent; § 2.14].) And, it
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achieved that purpose: The couple did in fact reconcile, living together as a
married couple for another four years."
At trial, even Jan's counsel agreed that the disclosure statutes would
not apply to the Agreement had Jan not filed her initial and subsequently
dismissed dissolution petition. (1/21 RT 59:14-21.) But that fortuity is
irrelevant. As the trial court found (again, the finding is unchallenged by
Jan), "[t]he Agreement was negotiated and entered into while the
dissolution of marriage action was in abeyance." (Exh. A:779 [~30].) The
Agreement came about as if no petition had ever been filed: The parties
placed discovery on hold, and the dissolution proceeding was held in
abeyance while the parties worked at restoring the marriage. (See note 3,
above.) The reconciliation placed the initial dissolution proceeding into a
permanent deep freeze, lasting for six years, before it was finally dismissed.
(AA 1:4.)
To the extent the Agreement spoke about a divorce proceeding, it did
so only in the context of afuture proceeding, to be commenced anew if the
reconciliation did not work out, not in the context of a pending proceeding.
(See AA V:804-805 [~~ 2.4 ($1 million payments to Jan so long as "neither
Party has filed a Petition for Dissolution or Legal Separation"), 2.9 ("In the
event that either Ron or Janfiles a Petition for Dissolution of Marriage,"
Ron has sole possession of Green Acres property); 2.12 ("In the event of
either Party filing a Petition for Dissolution of Marriage," Ron is to buy Jan
78 Jan notes that the Agreement did not require reconciliation.(AOB 75.) This misses the point. What matters is that the Agreementunquestionably contemplated reconciliation, even if its validity was notconditioned on reconciliation. The fact that a four-plus year reconciliationactually took place was not a coincidence.
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a separate house), emphasis added throughout].) No one believed, nor
could they rationally have believed, that the initial petition qualified to
trigger the Agreement's various provisions tied to the potential filing of a
future dissolution petition."
When Jan again separated, she did not seek to revive her old
dissolution petition, but filed an entirely new dissolution action, claiming a
new April 2002 separation date-four and one-halfyears after the
Agreement-thus confirming the reality that her old dissolution petition had
long ceased to have any vitality. (AA 1:6.)
For all these reasons, the trial court's unchallenged finding that the
Agreement was reached in contemplation of reconciliation, not dissolution,
is fully supported. (Exh. A:779 [~30]; see also 1/21 RT 72:12-74:9.) The
Agreement was simply not covered by the formal disclosure requirements
applicable in dissolution proceedings headed for final judgment.
4. Nothing in the statutory disclosure requirements
directs voiding an otherwise valid agreement.
There is not a single word in the statutory scheme setting forth the
formal disclosure requirements applicable in dissolution proceedings that
states (or even hints) that noncompliance with such requirements would
compel vacation of an otherwise valid agreement.
79 Jan notes that she had not dismissed her initial dissolution actionwhen she executed the Agreement and that she did not dismiss that action inconnection with executing the Agreement. (AOB 75-76.) She elevatesform over substance. As demonstrated, both the parties and the Agreementtreated that action as abandoned and their reconciliation sealed itsabandonment. The Agreement and the abandoned action were independentof each other.
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Other than setting forth the procedural steps for obtaining judgment
in a dissolution proceeding, the statute nowhere addresses the substantive
requirements for determining an agreement's validity. Rather, the sole
statutory remedy for failing to comply with the disclosure statutes is to
permit the trial court to refuse to enter a property-divisionjudgment until
there is compliance or to vacate such a judgment if already entered without
compliance. That this is so is repeatedly demonstrated by explicit statutory
language. 80
Jan argues that the final disclosure provision, section 2105, applies
"whenever 'the parties enter into an agreement for the resolution of
property or support issues'" or determine spousal rights, regardless whether
there is a pending marital dissolution proceeding or contemplated
dissolution judgment. (AOB 75.) This, of course, is squarely refuted by
80 E.g., Fam. Code, § 2106 ("absent good cause, no judgment shallbe entered with respect to the parties' property rights without each party"providing a final financial disclosure declaration); see also Fam. Code,§§ 2107, subd. (d) (2005) ("If a court enters a judgment when the partieshave failed to comply with all disclosure requirements of this chapter, thecourt shall set aside the judgment"); see also §§ 2105, subd. (c) (2005) ("inmaking an order setting aside a judgment for failure to comply with thissection, the court may limit the set aside to those portions of the judgmentmaterially affected by the nondisclosure"), 2105, subd. (d)(5) (2005) (inwaiving a final disclosure declaration "(e)ach party (must) understandt) thatnoncompliance with (the substantive disclosure) obligations will result inthe court setting aside the judgment"), emphasis added throughout.
That the scheme was intended to apply only to judgments is furtherrevealed in the 2001 amendment to sections 2100, et seq. The amendmentmade clear that the new provisions (amending, e.g., §§ 2105, 2107) appliedonly to "any judgment that becomes final on or after January 1,2002."(Stats. 2001, ch. 703, § 8, emphasis added.) Similarly, when initiallyenacted, the scheme applied only to any ''proceeding'' commenced afterJanuary 1, 1993, not to agreements entered before or after any particulardate. (Fam. Code, § 2113.)
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section 2000, expressly limiting the application of the statutory scheme to
dissolution proceedings. Clearly, statutes expressly limited to dissolution
proceedings cannot permissibly be applied outside of that context. There is
not a word in the statutory scheme that supports Jan's assertion."
Jan argues that not expanding the statutes beyond their intended
reach to cover this situation would "leave a loophole of a proffered attempt
at marital reconciliation through which a cheating spouse could crawl ...."
(AOB 76.) But that's not our case. Here, Jan ignores the trial court's
finding that Ron genuinely intended to reconcile and that Ron was not a
"cheating spouse," but the exact opposite.F
Jan's position is not helped by her reliance on Marriage ofFell
(1997) 55 Cal.AppAth 1058. (AOB 70-72.) Contrary to Jan's assertion,
that case does not establish that sections 2100, et seq., govern the
Agreement's validity.
First, Fell involved a true marital settlement agreement, i.e., one
intended to dissolve the marriage and on which a judgment dissolving the
81 That the Legislature did not intend the statutory scheme to extendoutside the context of dissolution proceedings is further supported by thefact that the Legislature expressed no intention to supersede or implicitlyrepeal the numerous statutes specifically addressing premarital agreementsand the relations of spouses during marriage. One would certainly expectthat, if the Legislature intended the all-encompassing and radical revisionsin California law that Jan suggests, it would have said something in thestatutory scheme about the enforceability ofagreements. (See Fam. Code,§§ 852 [setting forth that marital property transmutation is "not valid"unless certain requirements are met]; 1615 [specifying grounds for notenforcing premarital agreements].) But there is not a word in the statutethat supports Jan's position.
82 If a spouse misrepresents an intent to reconcile, there is ampleexisting remedy. (See Fishbaugh v. Fishbaugh, supra, 15 Ca1.2d445; Lanev. Lane, supra, 78 Cal.App. 326.) There was no such misrepresentationhere.
119
marriage was entered several weeks later. (55 Cal.App.4th at p. 1060.)
That is not this case. Here, the Agreement was not executed for the purpose
of dissolving the marriage; as the trial court found, it was entered for the
purpose ofprolonging the marriage in the hope that it would not be
dissolved.
Second, in Fell, as the opinion itself noted, the parties could have,
but did not, obtain a finding of good cause excusing compliance with the
disclosure requirements. (Id. at pp. 1064-1065.) In our case, the trial court
made an express good cause finding."
Third, in Fell, the validity of the judgment and the marital settlement
agreement were presented to the appellate court as a whole, all or
nothing-presumably because there were no disclosures of any type.
Nowhere does Fell address, hold, or even hint that a valid agreement-one
entered by fully informed, represented parties, and without undue
influence-must fall just because the judgment is defective.
There is simply no reason to apply sections 2100, et seq., to
circumstances for which they were never intended.
83 Jan seems to suggest that the parties should have presented theAgreement to a court in 1997 to request it be approved for fairness andincorporated into a judgment then. (AOB 76.) This notion is bizarre.There is no authority or procedure allowing a spouse to present anagreement during marriage to a court for a non-adversarial advisory opinionto confirm both parties' views of its validity. Family courts do not exist tooversee the spouses' efforts in adjusting their rights and obligations duringa reconciliation, nor to issue advisory opinions on the validity of spousalagreements executed in contemplation of reconciliation.
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5. Even if the statutory scheme applied and even if
there were no good cause finding, there still would
be no basis for reversing the order.
a. Jan's action is time barred.
Even if the formal written disclosure statutes were somehow
applicable, Jan's challenge to the Agreement based on such statutes still
must fail. The reason: It is far too late; it is barred by limitations and by
laches.
Family Code section 2122, subdivision (f) (2005), provides that any
challenge based on a failure to comply with the disclosure requirements
must be brought within one year after Jan knew or should have known
about the failure to comply. That date occurred before Jan brought the
present petition; thus, even if the statutory scheme were somehow
applicable, Jan's action would be barred by section 2122. And, as the trial
court found, it was barred by laches."
b. Jan has not shown prejudice.
But even if Jan could overcome all these insuperable hurdles
(something she cannot do), she still would not be entitled to relief because
she has nowhere claimed she suffered prejudice by reason of any
noncompliance with the statutory requirements. (Cal. Const., art. VI, § 13;
Marriage ofSteiner, supra, 117 Cal.AppAth at pp. 525-528 [failure to
84 Section 2122 applies to "judgments" entered after January 1,2002. Jan did not file the present petition until June 2003.
121
comply must be prejudicial before appellate court can reverse trial court's
judgment].)
Nor could there be any prejudice or miscarriage ofjustice here, as
the trial court found that Ron "complied with ... his duty to make a true
and full disclosure of community assets" and Jan relied on her own
investigation, not on any representation by Ron. (Exh. A:780-782 [,-r,-r 32,
37,38].) Jan has not challenged those findings in her Opening Brief.
The Opening Brief assumes Jan would have refused to enter into the
Agreement if the disclosures found by the trial court to have been made to
her had been formalized in documents that met the strictures of sections
2100, et seq. This is total speculation, unsupported by the record.
Indeed the speculation does not even make sense. Jan testified and
the trial court found that she entered the Agreement in reliance on her own
investigation, not on Ron.
* * *For all these reasons, sections 2100, et seq., have no impact on the
order determining the Agreement was valid and enforceable. The statutory
requirements were not applicable to the Agreement and, even if they would
have applied, the trial court's unchallenged good cause finding excused
their applicability here."
85 Jan's last contention is equally unsupported. She asserts that, ifthe Court reverses for a retrial, it should also "set aside" the trial court's"order assigning the case to a private judge." (AOB 85.) There is no suchorder. The court ordered the case assigned to a referee (AA 1:181), but thenJan and Ron stipulated to a private judge (AA 1:226). There is nothing toreverse. Jan entered a stipulation and is bound by it. Period.
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CONCLUSION
For all the reasons stated, the order determining that the Agreement
is valid and enforceable should be affirmed. The order is supported by
findings that Jan never challenged and, thus, they are binding and
conclusive on appeal. As a matter of law, therefore, the Agreement is valid
and enforceable and Jan's attack on the validity and enforceability of the
Agreement was barred by the doctrines of ratification, estoppel and laches.
As part of their reconciliation attempt, Jan and Ron entered into an
Agreement designed to enhance their reconciliation effort and to eliminate
forever sources of financial friction. Represented by a battery of family-law
professionals, Jan-fully understanding the terms of the Agreement,
knowing the facts pertinent to the Agreement, appreciating what she was
gaining and relinquishing-decided the Agreement was in her best interests
and executed it freely and voluntarily and without undue influence, as the
trial court found.
Jan bargained for and received exactly what she wanted-a lifetime
of financial security, with a millionaire's lifestyle and with minimal
financial risk. And Ron bargained for and received exactly what he
wanted-the opportunity to invest as he wished in order to amass additional
wealth, albeit with risk. Having received exactly what she wanted and
having accepted millions of dollars ofbenefits under the Agreement, Jan
had no right to disclaim it years after the fact in order to seize riches that did
not belong to her and as to which she was not willing to incur the risk to
gam.
123
124
These types of agreements are strongly supported by public policy.
They should be encouraged, not discouraged. This Agreement is valid and
enforceable. The order so holding should be affirmed.
Dated: October 14, 2005 WASSER, COOPERMAN &CARTER Dennis M. Wasser Bruce E. Cooperman
GREINES, MARTIN, STEIN &RICHLAND LLP Irving H. Greines
CHRISTENSEN, MILLER, FINK,JACOBS, GLASER, WEIL &SHAPIRO LLP Patricia L. Glaser
By:Irving H. Greines
Attorneys for RespondentRonald W. Burkle
RB 124
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